NEW YORK, June 25 /PRNewswire/ -- Standard & Poor's announced in a teleconference today that the second-quarter growth in operating earnings for the world's most widely followed stock market index, the S&P 500, is estimated at $23.21, or $206 billion in aggregate. This is up from the $22.38 reported during the first quarter of 2007, and 5.7% higher than the corresponding $21.95 posted during the second quarter of 2006.
Operating EPS for 2007 are projected to be $94.08 versus $87.72 in 2006 (a 7.3% year-over-year gain). On an aggregate basis, earnings of $837 billion are estimated for 2007 versus $788 billion in 2006. Standard & Poor's is forecasting a slightly higher gain of 9.7% in as-reported 2007 earnings to $89.38 ($795 billion) from the $81.51 ($734 billion) reported in 2006.
"Although investors may be concerned about the current earnings downturn, we believe it is taking place in an orderly fashion," says Howard Silverblatt, Senior Index Analyst at Standard & Poor's. "Investors have enjoyed more than four years of record-setting earnings. While Standard & Poor's Equity Research Services sees single-digit gains continuing with a 2.4% rise in the third quarter, the fourth quarter is projected to make a return to double-digit growth that will carry through 2008."
"Several factors, including a rise in oil prices, a delayed Fed rate cut and higher bond yields, which may have normally triggered a sell-off, have been non-factors as the market has endured significant volatility and sustained its upward performance," says Sam Stovall, Chief Investment Strategist of Standard & Poor's Equity Research Services. "However, we believe, over the longer term, a potential weakening of fundamental factors, including decelerating earnings growth, may limit this. To sustain positive performance, we think it's best to overweight the more predictable health care and consumer staples sectors."
Standard & Poor's notes that the second quarter of 2007 will represent the third consecutive quarter of single-digit growth for S&P 500 earnings. This follows 18 consecutive quarters of double-digit earnings gains. Despite this dip in earnings gains, the expected full-year 2007 single-digit gains still represent a potential new high for both operating and as-reported earnings.
Second-quarter earnings reflected the economy's slowing into a "soft landing" prompted by the weakened housing sector. Regardless of this, the S&P 500 reached an all-time high in the second quarter, and a rise in June would represent the sixteenth advance in the last 18 months. However, the S&P Investment Policy Committee (IPC) is maintaining its year-end 2007 S&P 500 target of 1510, a 6.5% gain from 2006, as the IPC thinks the market may not be able sustain a potential extension of this rally, which has been fueled by investors fearful of missing out.
These insights as well as an international equity outlook and specific U.S. equity sector expectations and stock recommendations were delivered as part of the latest installment in Standard & Poor's Equity Research's quarterly teleconference series. Attendees received guidance on earnings estimates and actionable investment insight for year-end 2007 from the S&P analytical and investment strategy team.
A replay of the teleconference is available by dialing 1-402-220-6441, and entering conference ID#: 7770389 and pass code "SANDP", or by logging on to http://www.mymeetings.com/nc/join, and entering conference ID#: PG7770389 and pass code "SANDP."
For more information, please visit: http://www.standardandpoors.com/.
OPERATING EPS Q1 2006 Q2 2006 Q3 2006 Q4 2006 2006
OVER OVER OVER OVER OVER
Q1 2005 Q2 2005 Q3 2005 Q4 2005 2005
S&P 500 15.26% 13.05% 22.26% 8.92% 14.75%
Consumer
Discretionary 27.42% 7.65% 56.35% 0.35% 20.01%
Consumer Staples 6.10% 5.94% 4.36% 5.66% 5.49%
Energy 36.32% 44.12% 34.13% -5.84% 24.72%
Financials 6.53% 13.08% 28.04% 24.87% 17.52%
Health Care 23.49% -1.71% 11.14% -0.12% 7.79%
Industrials 20.06% 15.72% 13.38% 16.28% 16.19%
Information
Technology 9.03% -2.66% 3.17% -2.80% 1.31%
Materials 6.52% 19.36% 45.85% 47.38% 27.30%
Telecommunication
Services -1.34% -0.03% 8.02% 40.75% 9.94%
Utilities 6.21% 29.65% 32.04% 3.14% 18.07%
OPERATING EPS Q1 2007 Q2 2007E Q3 2007E Q4 2007E 2007 E
OVER OVER OVER OVER OVER
Q1 2006 Q2 2006 Q3 2006 Q4 2006 2006
S&P 500 7.84% 5.74% 2.43% 13.26% 7.25%
Consumer
Discretionary -6.63% -2.72% -12.39% 16.80% -1.40%
Consumer Staples 6.14% 5.72% 8.35% 8.88% 7.31%
Energy 1.71% -6.46% -12.42% 6.32% -3.35%
Financials 10.82% 4.97% 3.24% 11.13% 7.54%
Health Care 13.15% 22.16% 11.39% 23.82% 17.36%
Industrials 14.24% 5.53% 8.55% 9.39% 9.26
Information
Technology 10.80% 10.44% 12.20% 23.39% 14.55%
Materials 16.89% 5.13% -4.94% -7.10% 2.46%
Telecommunication
Services -1.12% 25.05% 22.21% 29.06% 19.34%
Utilities 2.18% 9.11% 4.38% 11.32% 6.27%
About Standard & Poor's Index Services
Standard & Poor's Index Services, the world's leading index provider, maintains a wide variety of investable and benchmark indices to meet an array of investor needs. Its family of indices includes the S&P 500, an index with $1.3 trillion invested and $4.8 trillion benchmarked, and the S&P Global 1200, a composite index comprised of seven regional and country headline indices. For more information, please visit http://www.standardandpoors.com/indices.
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The equity research reports and recommendations provided by Standard & Poor's Equity Research Services are performed separately from any other analytic activity of Standard & Poor's. Standard & Poor's Equity Research Services has no access to non-public information received by other units of Standard & Poor's. Standard & Poor's does not trade on its own account. The analytical and ethical conduct of Standard & Poor's equity analysts is governed by the firm's Research Objectivity Policy, a copy of which may also be found at http://www.standardandpoors.com/ or by clicking here.
About Standard & Poor's
Standard & Poor's, a division of The McGraw-Hill Companies , is the world's foremost provider of financial market intelligence, including independent credit ratings, indices, risk evaluation, investment research and data. With approximately 8,500 employees, including wholly owned affiliates, located in 21 countries, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit http://www.standardandpoors.com/.
