2010 Q3 earning estimate

In this article, we'll show how all of the S&P 500 Industry Sectors' Q2 2010 earnings fared vs. Q2 2009. We'll also look at the aggregate consensus Q3 2010 EPS estimates for each sector.

Overall, this past earnings season saw a majority of firms in each sector beating their Q2 2009 earnings reports. However, as the following table indicates, certain sectors were clearly more successful than others in this endeavor:

As you can see, the Tech and Consumer Discretionary sectors had a much higher % of Q2 2010 earnings reports that actually beat their Q2 2009 reports. Some analysts have attributed Tech's winning numbers as the result of corporate replenishment, while the high Consumer Discretionary figures are said to result from easy comparisons to a dismal Q2 2009.

However, this Q2 2010 earnings improvement hasn't translated into price appreciation for the winning sectors, particularly in the case of Tech, which was down for the year through the first 2 weeks of Sept., in spite of Tech firms posting so many improved Q2 earnings reports:


A recent Barron's article posited that investors may be shying away from the Tech sector because of a lack of dividend paying stocks in that sector. Indeed, you can see from these tables that, even though the Telecoms and Utilities % of beating Q2 2009 earnings was much lower than Tech's, these 2 sectors have both had much better returns in 2010. The following table may help to explain why:

With an increasing dividend yield that's over 4 to 5 times that of the Tech sector, it appears that "graying" equity investors may be switching their bias from potential growth Tech stocks back to dividend stocks. This often appears to be the approach that many pundits and advisers have been echoing also. As we've noted in previous articles, Sector average dividend yields don't tell the whole story - for example, there are many Energy, Materials, and Telecom stocks with much higher yields listed in the various sections of our High Dividend Stocks by Sector Tables.

Looking ahead to Q3 2010, the EPS estimates for the dividend heavy Telecom sector are much improved from earlier in the year, second only to Financials:


Data Source used for data in these tables: Standard & Poors