{"id":643,"date":"2017-07-27T16:32:36","date_gmt":"2017-07-27T20:32:36","guid":{"rendered":"https:\/\/www.etfresearchcenter.com\/articles\/?p=643"},"modified":"2017-07-27T16:32:36","modified_gmt":"2017-07-27T20:32:36","slug":"new-heights-2q17-results-by-sector","status":"publish","type":"post","link":"https:\/\/www.etfrc.com\/articles\/index.php\/2017\/07\/27\/new-heights-2q17-results-by-sector\/","title":{"rendered":"New Heights: 2Q17 Results by Sector"},"content":{"rendered":"

Second quarter reports are shaping up surprisingly strong, and are at least partly to thank for the recent string of new market highs. With nearly half of S&P 500 constituents having reported second quarter 2017 results (and using consensus estimates for the remainder) it looks as if overall index earnings grew more than 10% year-on-year, or about $26 billion, to $280 billion.<\/p>\n

That would be a new all-time high, equating to about $32.71 per share. (The S&P 500 SPDR ETF (SPY<\/a>) trades at approximately 1\/10th<\/sup> of the S&P 500 Index; its EPS is also about 1\/10th<\/sup>). The Technology (XLK<\/a>), Financials (XLF<\/a>) and Energy (XLE<\/a>) sectors were the biggest contributors to overall index earnings growth, but all sectors except Utilities (XLU<\/a>) likely saw gains (Figure 1).<\/p>\n

 <\/p>\n\n\n\n\n\n
Figure 2:\u00a0S&P 500 2Q17 Earnings Growth by Sector<\/strong>
\n$millions and percent\u00a0change, year-on-year<\/i> <\/span><\/td>\n<\/tr>\n
\"\"<\/td>\n<\/tr>\n
Source: ETF Research Center and FactSet<\/em><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

Revenue probably grew about 5.3% year-on-year, with Energy being the largest contributor. Even excluding the Energy sector top-line growth was probably 4.2%, respectable for this late in the economic cycle but a moderation from recent quarters\u2019 growth (Figure 2).<\/p>\n

In any event margins likely hit a new cyclical high of 10.1% which could put a damper on future earnings growth, since the unrelenting nature of competition means there\u2019s a limit to how high margins can go (Figure 3). If they\u2019ve maxed out, then future earnings growth will be limited to revenue growth.<\/p>\n

 <\/p>\n\n\n\n\n\n
Figure 2: S&P 500 YoY Sales Growth<\/strong>
\nExcluding Energy, quarterly, 1Q10\u20132Q17<\/em>
\n<\/span><\/td>\n		<\/td>\nFigure 3: S&P 500 Net Margins<\/span><\/strong>
\nQuarterly, 1Q10-2Q17<\/em><\/span><\/td>\n<\/tr>\n
\u00a0\"\"<\/td>\n\u00a0<\/strong><\/td>\n\u00a0\"\"<\/td>\n<\/tr>\n
Source:\u00a0ETF Research Center, FactSet & Bloomberg<\/em><\/td>\n<\/td>\nSource: ETF Research Center, FactSet & Bloomberg<\/em><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

Meanwhile upside surprises are running a healthy 6.5% ahead of expectations among companies that have reported results so far. Historically, upside surprises run in the neighborhood of 3%, as companies beat guidance that they themselves have often provided. Technology leads the pack with upside surprises amounting to 12.5% above consensus expectations\u2014thanks mostly to Microsoft\u2019s (MSFT) blowout quarter\u2014followed by Consumer Discretionary (XLY<\/a>) at +8.3% so far. Energy is the laggard at only +1.5%, but only few of the majors have reported results yet so that could change.<\/p>\n

 <\/p>\n

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Second quarter reports are shaping up surprisingly strong, and are at least partly to thank for the recent string of new market highs. With nearly half of S&P 500 constituents having reported second quarter 2017 results (and using consensus estimates for the remainder) it looks as if overall index earnings grew more than 10% year-on-year,…<\/p>\n","protected":false},"author":2,"featured_media":652,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[55,6],"tags":[4,8,9,15,32],"class_list":["post-643","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-earnings","category-sector-etfs","tag-spy","tag-xle","tag-xlf","tag-xlk","tag-xly","description-off"],"_links":{"self":[{"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/posts\/643","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/comments?post=643"}],"version-history":[{"count":6,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/posts\/643\/revisions"}],"predecessor-version":[{"id":654,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/posts\/643\/revisions\/654"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/media\/652"}],"wp:attachment":[{"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/media?parent=643"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/categories?post=643"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.etfrc.com\/articles\/index.php\/wp-json\/wp\/v2\/tags?post=643"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}