S&P 500 Index: Earnings Season Report

The U.S. S&P 500 index is initiating another reporting season this week with Alcoa (NYSE:AA) reporting earnings on Monday, July 9, 2012. Over 300 companies representing approximately 72% of S&P 500 market capitalization are expected to report in July followed by another 164 index constituents in August and 25 in September.

Earnings expectations
The S&P 500 index estimate of indexed earning per share (EPS) for the 3-month trailing EPS for the period ending September 30, 2012 is 26.25 which represents a growth rate of 5.93% (Qt/Qt-4). The estimate for the period ending December 31, 2012 is 27.42, suggesting an annual growth of 10.88% (Qt/Qt-4).

Earnings expectations by sector (GICS Level 1)
From a sector perspective Information Technology (28.4%) and Consumer Discretionary (11.0%) are expected to record the largest earnings per share growth for the period ending September 30, 2012. The Energy (-11.1%) and Materials (- 8.6%) sectors are expected to show the weakest growth over the respective period. Six of 10 sectors are expected to record an increase in EPS when compared to earnings reported for a comparable period one-year earlier.

Sales/Revenue expectations
The S&P 500 index estimate of indexed sales per share for the 3-month trailing sales for the period ending September 30, 2012 is 275.63 which represents a growth rate of 3.18% (Qt/Qt-4). The estimate for the period ending December 31, 2012 is 283.0, suggesting an annual growth of 6.30% (Qt/Qt-4).

Sales/Revenue expectations by sector (GICS Level 1)
From a sector perspective Information Technology (9.2%) and Health Care (7.7%) are expected to record the largest sales/revenue per share growth for the period ending September 30, 2012. The Financial (-10.9%) and Consumer Staples (1.6%) sectors are expected to show the weakest sales growth over the respective period. Nine of 10 sectors are expected to record an increase in sales per share when compared to sales reported for a comparable period one-year earlier.

Profit Margin expectations
The estimate of the indexed profit margin (based on indexed EPS and indexed sales) for the period ending September 30,\ 2012 is 9.52% compared to 9.28% for the period ending Q3 2011. This suggests a margin expansion of 2.6% (Qt/Qt-4) for the period. The estimate for the period ending December 31, 2012 is 9.69% compared to 9.29% for the period ending in Q4 2011, suggesting a margin expansion of 4.30%.

Profit margin expectations by sector (GICS Level 1)
From a sector perspective Financials (22.3%) and Information Technology (17.6%) are expected to record the largest profit margin expansion for the period ending September 30, 2012. The Energy (-15.6%) and Materials (-10.8%) sectors are expected to show the deepest profit margin contraction over the respective period. Five of 10 sectors are expected to record an increase in profit margins when compared to margins reported for a comparable period one year earlier.