S&P 500 companies face profit recession for the first time in three years

UNITED STATES, WASHINGTON (OBSERVATORY) — Companies in the S&P 500 index are experiencing a recession in profits for the first time in three years, and the situation is expected to worsen in the third quarter, MarketWatch reports.

All companies included in the S&P 500, published financial results for the II quarter, showing a decline in profits by an average of 0.35%. In the first quarter, the decline in earnings per share was 0.29%.

A decline for two consecutive quarters is classified as a recession of profits. Profits declined for the second quarter in a row for the first time since Q2 2016.

Analysts polled by FactSet forecast a sharper fall in Q3. Profit reduction is expected to average 3.95%. At the same time, the forecast assumes an increase of 1.3% according to the results of the calendar year as a whole.

Among the outsiders in the II quarter were metallurgical and mining companies. Profit of this sub sector decreased on average by 76% amid falling prices and rising costs. Industrial companies also showed negative dynamics, although the decline in the sector by 10.23% is largely due to the results of Boeing Co.

According to the results of the II quarter, Boeing recorded a loss of almost $ 3 billion, as the world’s largest aircraft manufacturer faced a long suspension of flights of its best-selling 737 MAX.

In general, five out of 11 sectors in the S&P showed an increase in profits. The growth leaders were healthcare companies and insurers. Other sectors that showed profit growth were communications services, finance, real estate and utilities. Analysts expect the same five sectors in which profits rose in the second quarter to show positive momentum in the third quarter.

The S&P 500 index in the past quarter grew by 3.1%.


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