Did lower forecasts for GDP growth drive earnings expectations down with it?

On Thursday, the Organization for Economic Cooperation and Development (OECD) lowered its forecast for GDP growth in the U.S. for the third quarter and fourth quarter of 2011. Given this report and others predicting lower GDP growth in the U.S., have analysts lowered their estimates for annual corporate earnings for companies in the S&P 500 over the last few weeks?

The answer is yes.

A large number of companies have seen a drop in their mean EPS estimates for 2011 and 2012 over the past month. However, the cuts have not had a significant impact on aggregate earnings for either year to date. The bottoms-up EPS estimate for 2011 only dropped 0.3% during this time, while the EPS estimate for 2012 fell 1.1%.

Shifting back to the third quarter, analysts are expecting another solid quarter of earnings and revenue growth for the S&P 500. The index is currently predicted to see earnings growth of 14.2% (on earnings of $237B), and revenue growth of 10.1% (on sales of $2,447B). Both of these growth rates are below projections at the beginning of the quarter of 16.4% and 10.5%, respectively. If the final earnings growth rate is 14.2%, it will mark the eighth consecutive quarter of double-digit earnings growth. Nine of the ten sectors are projected to see growth in earnings, led by the Energy sector. If the final sales growth rate is 10.1%, it will mark the second consecutive quarter of double-digit growth. All ten sectors are predicted to see growth, again led by the Energy sector.

Sectors to watch this quarter in terms of high year-over-year earnings growth include Energy, Materials, Financials, and Consumer Discretionary.

This week, one S&P 500 company is expected to announce earnings for the third quarter.
 

Read more about the impact of the OECD forecast and expectations for the third quarter 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.