Q2 Earnings Preview: “After Strong Q1 Guidance, Watch Out For Weakness In Q2”

2Q17 earnings season kicks off next Friday with four banks – Citi, JPM, Wells And PNC – reporting results, accounting for roughly 5% of the S&P 500 by market cap. 89% of the S&P500 is expected to report earnings by August 4th. And while most analysts expects a beat vs. consensus (+7% EPS) in 2Q, BofA warns that analysts’ forecasts continue to look overly optimistic for the 2H, particularly in 4Q.
After an ‘as good as it gets’ 1Q17 (EPS growth hit a five-year high, sales growth was the best in over two years, and beats hit a 13-year high) largely thanks to a rebound in energy profits, decelerating trends are expected in 2Q, when as Goldman is quick to note, consensus expects S&P 500 EPS year/year growth of 7% in 2Q – driven once again mostly by a forecast 370% rebound in Energy EPS – roughly half the 14% EPS growth in 1Q. Excluding Energy, EPS is expected to grow by 4%, led by Info Tech (+10%) and Financials (+6%). Sales growth is expected to be led by Energy (+26%) and Information Technology (+12%). Two sectors, Materials and Telecom Services, are forecast to experience declines in revenues.
Only three sectors are expected to expand margins during the second quarter (Energy, Telecom Services, and Materials). Goldman further adds that S&P 500 margins of 9.5% are expected to remain flat vs. 2Q 2016, with just three sectors forecast to expand margins.

This post was published at Zero Hedge on Jul 9, 2017.