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S&P 500 energy earnings estimates fall with declining oil prices

Jun 15, 2012

S&P 500 Energy Sector EPS (Q212) vs. Brent Crude (ICE/$bbl)Despite a 20% decline in the price of oil since the start of the second quarter, OPEC decided yesterday to keep oil production at current levels. Over this same time frame, the EPS estimate for the S&P 500 energy sector has fallen about 5%, which is the largest decline of all ten sectors. In addition, the Energy sector is predicted to have the lowest earnings growth rate (-18.4%) and sales growth rate (-12.0%) of all ten sectors for Q2 2012.

Overall, the estimated earnings growth rate for the S&P 500 for Q2 2012 is 3.6%, slightly below last week’s estimate of 3.7%. Downward revisions to estimates for companies in the Utilities and Financials sector were mainly responsible for the small drop in the growth rate. Bank of America is expected to be the largest contributor to earnings growth for the index at the company level, mainly due to an easy comparison to a large loss reported in the year-ago quarter. Excluding Bank of America, the projected earnings growth rate for the index falls to -1.1% from 3.6%.

Five of the ten sectors are predicted to report earnings growth for the quarter, led by the Financials (55.2%), Industrials (7.0%) and Information Technology (4.0%) sectors. The Energy (-18.4%) and Materials (-11.1%) sectors are expected to have the lowest earnings growth rates for the quarter, as oil and commodity prices have fallen in recent weeks. Nine of the ten sectors are projected to report revenue growth for the quarter.  Increased costs and slower global economic growth will likely have a negative impact on top-line and bottom-line growth.

Looking ahead, analysts have reduced earnings estimates for the 2nd half of 2012 during the past few weeks. However, they are still projecting double-digit earnings growth (14.2%) in Q4 2012.

The peak weeks of the Q1 2012 earnings season are now finished. During the upcoming week, 11 companies in the S&P 500 are scheduled to report earnings results.

Read more about the earnings trends of the S&P 500 in this week's edition of FactSet Earnings Insight. Visit www.factset.com/earningsinsight to launch the latest report.

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