Q3 has not ended yet, but the September quarter earnings season gets underway this week with Oracle (ORCL - Analyst Report) reporting after the close on Thursday. Oracle will be reporting results for its fiscal quarter ending in August, which gets counted as part of the Q3 reporting tally. There are more than two dozen companies with similar fiscal periods that will be reporting results in the following and beyond, including operators such as FedEx (FDX - Analyst Report) , Nike (NKE - Analyst Report) ,Adobe Systems (ADBE - Analyst Report) and others.

Estimates for Q3 came down as the quarter got underway, in-line with the trend that we have become used to seeing over the last few years. The chart below shows how bottom-up earnings growth expectations for the S&P 500 index have evolved since the start of the quarter.

As negative as this revisions trend looks, it is nevertheless an improvement over what we have become used to seeing by this stage in other recent reporting cycles. The improved commodity-price backdrop and the reduced dollar drag are some of the more plausible explanations for this development.

The -3% decline in Q3 earnings from the same period last year on +1.6% higher revenues, which would compare to earnings declines of -2.7% on -0.2% lower revenues in the preceding quarter. Please note, however, that Q2 earnings were expected to be down -5.9% on -0.7% lower revenues at the comparable stage in that reporting cycle.

Regular readers know that our overall commentary on the Q2 earning season was less negative compared to the last few reporting cycles. This reflected an ever-so-modest improvement in the growth picture, both for Q2 as well as expectations for Q3. Growth has been in negative territory for a while now - Q2 was the 5th quarter in a row of earnings declines for the S&P 500 index. The Energy sector has been, and continues to be, a big drag on the overall growth picture. But we can’t blame Energy alone for all the growth challenge; there is simply not much momentum from the other major sectors either.

That said, there is a sense that the worst is likely behind us with respect to earnings growth, with the growth picture currently expected to turn positive in the last quarter of the year and ramping up in the following quarters. A key element to watch during this coming reporting cycle will be how Q4 estimates evolve over the coming days.

The table below shows the summary picture for Q3 earnings, revenues and margins contrasted with the corresponding results from Q2 (please note Q2 isn’t officially over yet; we still have one report to go).

Expectations Beyond Q3

The chart below shows current quarterly earnings growth expectations for the index in 2016 Q2 and the following four quarters contrasted with actual declines in the preceding four quarters. As you can see, Q3 is now in negative territory as well, with the last quarter of the year as the only one that is currently expected to be in positive territory.

The Energy sector drag is expected to end in 2016 Q4 and beyond. We will see if those estimates will hold up as we reach the last quarter of the year. But given what we have seen over the last few quarters, the odds don’t look that favorable.

Here is a list of the 19 companies reporting this week, including 1 S&P 500 member.