In aggregate, earnings for the third quarter for the S&P 500 are expected to increase by 4.6% on a yearover-year basis. The estimated growth rate today is nearly half the expectation at the start of the quarter (9.0%). The decline in the growth rate can be attributed in part to Bank of America, as analysts included the impact of the company’s settlement with the DOJ in their Q3 estimates. In addition, 82 companies in the index have guided EPS estimates lower for the quarter. Overall, the Telecom Services, Materials, Health Care, and Financials sectors are projected to report the highest earnings growth rates, while the Consumer Discretionary sector is the only sector projected to a report a decline in earnings. In terms of revenues, sales for the S&P 500 are projected to increase by 3.6% on a year-over-year basis. The market will likely be watching for comments from companies regarding results (or economic conditions) in the United States, Europe, and China, as well as comments regarding geopolitical risks.
Looking at forward estimates, analysts are projecting much higher earnings growth in Q4 2014 and the first half of 2015 compared to Q3 2014. However, they are not predicting a substantial improvement in revenue growth, which implies that net margins are expected to increase in future quarters as well.
