Moving on to Q3 Earnings

Now that the second quarter earnings season is behind us, we look ahead to the third quarter to see where expectations stand. Below we highlight the consensus estimate for Q3 year-over-year earnings growth for the S&P 500 and its ten sectors.

As shown below, the Financial sector is expected to see earnings grow by a whopping 617.8% from Q3 '08 to Q3 '09! For those that remember Q3 '08, it wasn't a pretty sight for the Financials, so the starting point shouldn't be too tough of a number to grow on. But 617.8% is still nothing to laugh it, and it is indicative of the significant turnaround the Financials have seen in less than a year.

The S&P 500 as a whole is expected to see earnings decline by 21.8% in the third quarter. Consumer Discretionary is the only other sector expected to see year-over-year growth in the third quarter. Materials and Energy have the worst estimates at -69.2% and -66.7%, respectively.

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Comments

[David White]

Good article. However, I think it may be a little misleading as far as planning goes. For instance, the earnings for materials and energy will likely be the worst. However, both materials and energy commodity values fell abruptly in Q3 of 2008. Therefore Q3 should be the last really bad comparison quarter for these stocks. After that the earnings comparisons should get much better. It is possible, even likely, that the markets will pay more attention to guidance going forward than to actual Q3 results for these companies.

Additionally, commodity prices are predicted to increase as the recession ends, although there may be a near term retracement from current levels. If the commodity prices do increase, this should help the bottom lines of virtually all of these companies. This is the general prediction (the China and India factor), assuming a recovery. The markets often move 6 months in advance of actual data. If that holds true, these stocks may well do well in the near future (outperform many of the other areas). I would wait until after the retracement to buy them though.

2009 Aug 19 10:55 AM

[Kimball Corson]

3Q '08 to 3Q '09 is not the relevant comparison. 3Q '08 was still in bubble up land (GDP was up 2.9% then over 3Q '07 and up .3% quarter over quarter). To see if things are improving, we should compare to a seasonally adjusted 2Q '09 and I suspect that things will look a bit better in 3Q '09.

2009 Aug 19 09:10 PM