Are commodity-sensitive sectors suffering as prices gradually pull back?

On Thursday, the Federal Open Market Committee (FOMC) ended its program of quantitative easing (QE2). During the first six months of the program (from November to April), the prices of many commodities surged. However, many of these same commodity prices began to pull back in May and June, coinciding with the approaching end of the QE2 program. Shifting gears to earnings estimates, did analysts lower their estimates in May and June as well for commodity-sensitive sectors such as the Energy and Materials sectors?  Based on current estimates for CY 2011, the answer is no.

Overall, analysts are still calling for another solid quarter of earnings and revenue growth for Q2 2011. 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 slightly since the start of Q2 2011, as upward revisions to estimates in the Energy sector have been partially offset by downward revisions to estimates in the Financials 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 first few companies reporting numbers for Q2 2011. Next week, no S&P 500 companies are scheduled to report earnings for Q2 2011. The “unofficial” start of the Q2 2011 earnings season will be July 11, when Alcoa is expected to announce second quarter earnings numbers.

Launch FactSet Earnings Insight to read more about the impact of commodity prices on earnings.

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