S&P Earnings So Far Falling Short Of Q2 Projections

Ed Carson Fri Jul 25, 6:59 PM ET

Halfway through earnings season, banks are still a drag, tech firms are doing OK while the overall outlook remains cloudy.

With 249 of the S&P 500 companies reporting results, second-quarter profits are on track to decline 17.9% vs. a year earlier, according to Thomson Reuters.

"I'd rate (earnings so far) as pretty bad," said Sam Stovall, chief investment strategist at S&P Equity Research. S&P forecast a 10% drop at the start of the quarter but now sees about a 20% shortfall, he said.

Financial firms' profits are forecast to dive 85%. The consumer discretionary sector, including automakers and home builders, also is a big loser.

But excluding banks, S&P 500 earnings should rise a respectable 7.7%, Thomson Reuters said.

Energy firms should deliver 25% earnings growth on higher prices. Industry giants Exxon Mobil (NYSE:XOM - News) and Chevron report this week.

Tech profits likely rose 15%. But Google (NasdaqGS:GOOG - News), Microsoft (NasdaqGS:MSFT - News) and Yahoo (NasdaqGS:YHOO - News) have all missed views. Apple (NasdaqGS:AAPL - News), Microsoft and eBay (NasdaqGS:EBAY - News) gave gloomy outlooks, though IBM (NYSE:IBM - News) and Intel (NasdaqGS:INTC - News) were upbeat.

More firms must provide guidance to paint a clearer picture of future earnings, analysts say. Profits are expected to rebound due to easier comparisons for banks.

But sluggish economic growth and high raw material costs are squeezing firms.

A net 13% of business economists said profit margins shrank in the second quarter, according to a recent poll by the National Association for Business Economics.

Multinationals have relied on foreign demand and the soft dollar to offset a weak U.S. But with Europe and Japan stalling, they may face a tougher global environment.