Mutual Funds In Focus Ahead Of Q2 Earnings Season

The first quarter earnings season was not very encouraging and the official commencement of the second quarter earnings season too had a dismal start. After beating bottom-line estimates for four consecutive quarters, aluminum giant Alcoa finally missed the earnings estimates.

To add to the disappointment, the second quarter estimates have been moving lower. Management has consistently provided lower guidance. On that note, it can be said that under promising is a good thing to come out with outperforming results. The declining trend in second quarter earnings is not unique this time though. Also, the magnitude of lower revisions this time is lower compared to the trend ahead of the first quarter.

The spotlight is already on the second quarter earnings, and the action heightens starting next week. Before we brace ourselves for a very busy next couple of weeks, let’s look at some buy-ranked mutual funds that boast high average EPS growth.

Q2 Earnings Expectations

Earnings for the S&P 500 components are projected to decline 6.7% year over year while revenues may drop 6%. Growth is projected to suffer across 9 out of 16 sectors. These 9 sectors may incur earnings decline.

Again, the energy sector might be the biggest laggard as earnings for the sector may slump 64% with a decline of 41.5% in revenues. The finance sector however is expected to see 2.6% higher earnings, though sales may drop 5%. Technology on the other hand may incur a 1.6% drop in earnings, but revenues will improve 0.8%. Meanwhile, taking the energy sector out, total earnings for the S&P 500 may edge up 0.5% with 0.3% decline in revenues.

Despite negative revisions, and as mentioned earlier, the magnitude of revisions downward in second quarter is lower than first quarter. For the second quarter, the magnitude of negative revision is 3.1%. This compares favorably with 8.3% lower revisions in first quarter 2015 and 5.9% in first quarter 2014.

Run Up to the Second Quarter

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