Preview: Q3 Earnings Season

Savita Subramanian’s Equity and Quant Strategy team at BAML is out with their 3rd quarter 2015 earnings outlook.

All in all, Q3 consensus estimate is for a 4% year-over-year drop in S&P 500 earnings, with the 60% expected slide for energy companies skewing things quite a bit. Ex-energy, the rest of the S&P 500 should deliver something more like positive 3%.

Subramanian believes guidance will be cautious on the conference calls and that the new leg lower in oil, combined with the dollar’s continued strength, will make this a difficult season overall.

Similar to in 2Q, analysts are expecting an earnings decline this quarter. The expected YoY decline of 4% is less than the 5% YoY decline analysts expected going into 2Q, when earnings ultimate beat by 5%. Our forecast of $30.00 implies a 3% beat vs. current expectations of $29.02. The biggest headwinds to earnings growth this quarter are from a stronger dollar (+17% YoY on avg.) and lower oil prices (WTI -52% YoY on avg.). Excluding Energy, where earnings are slated to drop 60% YoY, earnings growth is expected to be +3% YoY, and sales growth ex. Energy is expected to be+3% YoY (Table 1).

Source:

3Q15 earnings may not be the catalyst we need
Bank of America Merrill Lynch – October 5th 2015