With the second-quarter 2013 earnings season now in peak week, S&P Capital IQ has stepped forward with its Q2 outlook, predicting that S&P 500 earnings growth will come in at 3.45%, while revenues will continue to lag at an estimated -1%.
Notably, strength in Q2 is anticipated to come from the financials and consumer discretionary sectors, with earnings per share (EPS) growth seen at 16.17% and 14.43%, respectively.
"Corporations have needed to very carefully manage costs and profit margins because of a year-over-year decline in revenue growth," said Robert Keiser, vice president of S&P Capital IQ Global Markets Intelligence, in a Tuesday webinar. "We're still looking at a very subpar growth environment, which is having a negative impact on revenue growth."
Although U.S. companies are likely to finish out 2013 with single-digit earnings, the market expects double-digit earnings growth in 2014, Keiser noted. S&P Capital IQ pegs overall 2013 EPS coming in at an all-time record of $110.54, surpassing the record of $103.47 posted in 2012.
He said that investors currently prefer high-quality stocks, with a bias toward large-cap equities.
The 3.45% growth expectations come as of Tuesday morning, when six companies reported Q2 earnings, including the financial companies Goldman Sachs (GS) and Charles Schwab (SCHW), said Christine Short, associate director of S&P Capital IQ Global Markets Intelligence.
"We are seeing some pretty decent revenue numbers so far," Short said, while acknowledging that earnings growth of 3.4% is "fairly low."
Goldman Sachs' Q2 profits doubled as the investment bank saw trading revenues roll in from fixed income, currency and commodities. Profits totaled $1.93 billion versus $962 million from Q2 2012, while EPS stood at $3.70 versus $1.78 a year ago and revenues jumped 30% to $8.6 billion. Analysts' expectations were for EPS of $2.82 on $7.98 billion in revenues.
