The final stages of second quarter earnings season are here and growth finally crossed into positive territory as more than 80% of the S&P 500 Index has reported results. Currently, earnings per share is projected to be $29.75 for the quarter, representing a 0.02% increase in growth year-over-year. That compares to the 4.4% decline expected at the start of earnings season on July 13th.
Leading growth are the health care, telecommunications and financials sectors, with growth of 14.5%, 12.2% and 11.9%, respectively. This is quite a change from July 13 when consumer discretionary, telecommunications, and health care were projected to lead with growth of only 6.1%, 6.0%, and 5.7%, respectively. Consumer discretionary has fallen to fourth place as the new leaders posted outsized earnings beats.
Q2 2015 EPS Growth Estimates
Only 66% of the consumer discretionary sector has reported so far as the retailers tend to bring in the rear of the earnings season.
Early announcements from Coach, Ralph Lauren, and Michael Kors, as well as Kate Spade, which is not part of the S&P 500 Index, indicate that retailers could finish the quarter better than anticipated. That being said, the bar was quite low for these retailers going into their reports.
The rest of the retail sub-sector will report in the following weeks. These companies’ results will be looked to as an indicator of the health of the consumer and will determine if the sector can achieve robust second-half growth expectations. Anticipated third-quarter earnings growth for the consumer discretionary sector is 13.6%, leading all 10 industries, and its 12.9% expected growth for the fourth quarter is second only to telecommunications. Thus, S&P 500 growth will largely depend on the consumer discretionary group, which will require investors to put extra focus on guidance from the upcoming reports.