What's causing the estimated earnings growth rate for the S&P 500 to decline?

During the past two weeks, the estimated earnings growth rate for the S&P 500 has declined by 1.5 percentage points, from 14.2% on June 24 to 12.7% today. The obvious question is: Where have analysts been trimming estimates over the last few weeks?  Digging into the numbers at the company level, Bank of America has witnessed the largest dollar-level decline in share-weighted earnings of any company in the index, and is accountable for most the decline in the earnings growth rate for the S&P 500 over the past two weeks. If this company is removed, the earnings growth rate for Q2 2011 for the remaining companies in the index would be 13.8%.

Even with the recent decrease in the expected earnings growth rate, 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 12.7%, while the estimated revenue growth rate stands at 10.1%. Since the start of Q2 2011, the Energy sector has seen the highest increase in earnings and revenue estimates, while the Financials sector has seen the largest decrease in earnings and revenue estimates.

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.

Next week marks the “unofficial” start of the Q2 2011 earnings season, as Alcoa is expected to announce second quarter earnings numbers on July 11. However, it will be a light week in terms of the overall number of companies reporting. Only ten other S&P 500 companies are scheduled to report earnings during the week, including Dow component JPMorgan Chase (July 14). The peak weeks of the Q2 2011 earnings season will begin the week of July 19.

Launch FactSet Earnings Insight to read more about earnings and sales projections for companies in the S&P 500.

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