Since the start of the third quarter, the Financials sector has recorded the largest percentage decline in estimated earnings of all ten sectors. On June 30, the estimated earnings growth rate was 21.0%. Today, the estimated earnings growth rate is 8.3%. Within the Financials sector, where have analysts been cutting estimates?
At the sub-industry level within the sector, The Investment Banking & Brokerage sub-industry has recorded the highest decrease in dollar-level earnings (-$2.1B) since June 30. The estimated earnings growth rate for this sub-industry was 81% on June 30. Today, the estimated growth rate is -42%. Within the Investment Banking & Brokerage sub-industry, Goldman Sachs has witnessed the largest decrease in aggregate dollar-level earnings (-$1.7B). In fact, Goldman Sachs is the largest detractor to earnings growth at the company-level in the Financials sector. Excluding Goldman Sachs, the estimated earnings growth rate for the Financials sector would improve to 13.0%.
Despite these downward estimate revisions, analysts are still expecting another solid quarter of earnings and revenue growth for the S&P 500. The index is currently predicted to see earnings growth of 12.0% (on earnings of $233B), and revenue growth of 9.7% (on sales of $2,438B). Both of these growth rates are below projections at the beginning of the quarter of 16.4% and 10.5%. All ten sectors have seen a drop in expected earnings growth since June 30. Downward revisions to estimates in the Financials sector account for about half of the decline in estimated earnings growth for the index.
If the final earnings growth rate is 12.0%, it will mark the eighth consecutive quarter of double-digit earnings growth for the index. Nine of the ten sectors are projected to see growth in earnings and all ten sectors are projected to see growth in sales. Sectors to watch this quarter in terms of high year-over-year growth in earnings and sales include Energy, Materials, and Consumer Discretionary.
This week marks the unofficial start of the Q3 2011 earnings season, as Alcoa is scheduled to announce results on October 11. Seven other S&P 500 companies are also scheduled to report numbers this week, including JPMorgan Chase (October 13) and Google (October 13). Read more about earnings season in this week's edition of FactSet Earnings Insight. All of the data used to compile FactSet Earnings Insight is available in the FactSet workstation.
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