by Eddy Elfenbein, Crossing Wall Street
The Q3 earnings seasons will start in a few days. Not too long ago, it looked like the S&P 500âs profit drought was set to end in Q3. That may be in doubt now. This could for the sixth quarter in a row of declining earnings for the S&P 500.
Many of the factors pressuring U.S. corporate earnings in recent quartersâincluding a stronger dollar and falling oil pricesâhave abated in 2016. The WSJ Dollar Index, which measures the U.S. dollar against a basket of 16 currencies, is down 4% this year, versus up 8.6% for all of last year, and the price of U.S.-traded crude oil has risen 20% in 2016, rebounding from its extreme lows.
Still, those moves havenât been enough to project an end to the earnings recession.
The battered energy sector of the S&P 500 had the largest downward earnings revision for the third quarter. Exxon Mobil Corp., for instance, was expected to report 80 cents a share of earnings for the third quarter as of the end of June, but as of Friday that expectation had worsened to 66 cents a share.
Analysts are currently forecasting a 2.3% drop in earnings compared with one year ago. The Energy sector is expecting to drop by 66%. This would be Energyâs eighth drop in a row. If you were to exclude Energy, then earnings growth for the S&P 500 would have been positive for four of the last five quarters.
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