How will rising energy costs affect Q2 2011 earnings?

  Tags: Content & Data , Companies , Topical & Trends

On Thursday, the International Energy Agency (IEA) announced that its member countries would release 60 million barrels of oil next month, causing crude oil futures to finish lower for the day. Despite this decline, oil futures are still trading well above year-ago levels. As a result, the ability of corporations to manage these higher energy costs will continue be a key theme during the Q2 2011 earnings season. Did companies find enough ways to raise prices, increase sales, or cut costs to sufficiently offset higher fuel costs? The answer to this question won’t be known until the end of earnings season. However, two companies (Carnival Corp. and FedEx Corp.) that reported earnings for Q2 2011 during the past week provided contrasting answers to this question.

 

Overall, analysts are still calling for another solid quarter of earnings and revenue growth overall. The estimated earnings growth rate for the index stands at 14.1%, while the estimated revenue growth rate stands at 10.4%. Both of these growth rate estimates have increased since the start of Q2 2011, mainly due to upward revisions to estimates in the Energy sector.

 

Some of the key themes that are impacting earnings and sales for the second quarter (and may also affect future quarters) include high commodity prices, continuing global economic growth, and the impact of the disaster in Japan. It is also important to watch how the results of this earnings season affect future earnings and sales estimates for the index.

 

The next couple of weeks will see the last few companies reporting numbers for Q2 2011. Next week, eight S&P 500 companies are scheduled to report earnings for Q2 2011.