After a surprisingly strong first quarter, companies in the S&P 500 are expected to post a drop in earnings (on a year over year basis) in the second quarter, according to S&P Capital IQ. In fact, the expected 0.32% drop would be the slowest “growth” rate since the third quarter of 2009. Analysts have also been reducing expectations; just two weeks ago they expected 0.3% growth. Earnings grew by about 7% year-over-year in the first quarter.
Corporate profits have been one of the few bright spots in the U.S. economy in the past couple of months, and a slump could keep investors in risk-off mode. Industrials, technology and consumer staples are the only three sectors where analysts expect earnings growth.
Analysts are more optimistic about top-line growth. They expect companies to grow revenue at a 5.35% rate, led by the Energy (18.27%), IT (8.77%),� and Utilities (7.09%) sectors.
The lack of earnings growth despite revenue growth may indicate that analysts believe companies have already seen the benefit of cost cuts and other efficiency measures enacted during the recession.
So far, only Costco (COST) and Autozone (AZO) have posted second quarter results and both beat analysts’ expectations.
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