Q3 Earnings For S&P 500 Index May Drop - Refinitiv

The U.S – China trade war has actively contributed to making it difficult for the market analysts to forecast what’s in the books for the S&P 500 index. Refinitiv’s senior research analyst, Mr. David Aurelio, however, has taken the leap and has reported his insights into a rather broader aspect of S&P 500 index.

While the investors have been focused on the short-term volatility, gains today – losses tomorrow scenario, Mr. Aurelio has made an elaborate analysis of the index to highlight that a significant drop in the S&P 500 earnings may be imminent. He has quoted the large corporations like Wells Fargo, Bank of America, and American Express, that are likely to begin the Q3 reporting season with the start of the new week, and have made the claim that it may be the first time in the past three years that earnings for S&P 500 face a sharp decline.

3.2% Decline In S&P 500’s Q3 Earnings Can Be Expected

According to Wall Street, the third quarter can be expected to present as much as 3.2% decline for the S&P 500 earnings. Considering that the energy sector contributes to much of it, a 1% drop can be expected if this sector is factored out. Revenue for the S&P 500 index, as per the announcement, however, has improved by 3.5%.

Mr. Aurelio has further referenced the 28.4% increase in Q3 earnings for the past year and has associated the current decline with Trump administration’s tax cuts. He spoke on behalf of the financial analysts and stated that anticipation for net profit margin contraction is getting stronger.

Speaking of the other side of the coin, the senior research analyst has also referenced the 3.2% increase in earnings in the second quarter when the analysts had forecasted an insignificant 0.2% increase. Similar was the case for the first quarter when the earnings were expected to drop by 2%, according to the analysts, but the actual figure presented a 1.6% gain instead.

Only 4% Of The Businesses Have Missed The Estimate So Far

In 23 companies that have reported earnings for the third quarter, only 4% were reported to have missed the estimate. In comparison, a typical quarter usually reports 20% of the businesses missing the estimate. In light of the current data, therefore, Mr. Aurelio opinionated that until the actual figure is revealed, probability for a flat or even positive earnings growth still remains on the table.

For the interested traders, the report also notified real estate and healthcare sectors to be the leaders of S&P 500 earnings so far.