Expectations for earnings growth have dipped into negative territory.
Even though 80% of companies had reported earnings-per-share above the mean estimate as at Monday morning, analysts are no longer forecasting earnings growth for S&P 500 companies, according to Factset.
“Expectations for earnings growth for Q1 2015 have been falling not only over the past few weeks, but also over the past few months,” wrote Factset’s John Butters. “On September 30, the estimated earnings growth rate for Q1 2015 was 9.9%. By December 31, the estimated growth rate had declined to 4.2%. Today, it stands at -1.6%.“
This would be the end of eight consecutive quarters of year-over-year earnings growth.
Energy companies are the big downers. On September 30, when a barrel of West Texas Intermediate crude oil cost around $US91 a barrel, the estimated earnings growth rate for energy companies was 3.3%. It plunged to -28.9% by December 31, and is currently at -53.8%. Oil prices have fallen over 40% from the peak in June 2014.
The outlook for the next earnings season also looks grim. As Business Insider’s Myles Udland reported, Goldman Sachs says 87% of the S&P 500 companies that have given forward guidance in their recent earnings report are guiding below consensus expectations.
Still, the S&P 500 looks set for an 8th consecutive quarter of year-over-year earnings growth, unless several companies miss, Butters wrote.