The S&P 500 Keeps Singing the Sour Earnings Song

The blues continue for S&P 500 corporate earnings. The quarter ending September 30 will mark the third consecutive negative period this year, according to numerous estimates.

The third quarter, when all the reporting is done, will come in with a drop of 4.2%, according to research shop CFRA. FactSet, which compiles estimates from analysts, says the third quarter will be down 3.6%, compared to negative 0.4% in the second and off 0.3% in the first. This all pales against the double-digit advances in 2017 and 2018.

Sam Stovall, CFRA’s chief investment strategist, wrote in a recent report that the three sectors likely to do the worst in 2019’s third quarter are energy (down 31.4%), materials (minus 20.6%), and real estate (falling 16.7%). That makes sense: Oil and natural gas prices are in the dumps, materials suffer as manufacturing slows down, and real estate on the residential side has been no dynamo, despite lower mortgage costs.

Meanwhile, the effect of the big federal tax cut has pretty much run its course. The S&P 500, which has a strong presence overseas, lately is feeling the effects of a weakening Europe and the US-China trade war.

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Along with this downbeat assessment are a spate of companies announcing that their earnings will come in below what analysts expect. They probably are trying to avoid surprises that will punish their stock even more than has been happening now. Tyson Foods, Macy’s, and Wynn Resorts are ratting themselves out on this score.

Beyond the large corporations that populate the S&P 5oo, the situation is even grimmer.

During the past three years, index’s net income rose a heady 50%. During the same time, the US Bureau of Economic Analysis’s assessment, which covers all American businesses down to the local deli, shows their after-tax profits going down 6%. The tax reduction evidently did little to help them.

CFRA sees a slightly improved fourth quarter for the S&P 500 (positive 2.8%), and then a 10.3% rebound in 2020.

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Tags: Bureau of Economic Analysis, CFRA, Earnings, S&P 500, Sam Stovall

About 160 companies found to collectively hold responsibility for about two-thirds of the world’s greenhouse gas emissions are receiving stiff pressure to decarbonize from an organization representing $35 trillion in assets under management across more than 370 global investors.

Climate Action 100+ is a five-year initiative launched in December 2017 that is out to ensure the world’s largest corporate greenhouse gas emitters take “critical action” to align with the goal of the Paris Agreement to ensure the rise in global temperatures remains below 2 degrees Celsius.

The group issued an initial progress report that found only 9% of the 161 companies they’re focusing on have emissions targets that are in line with (or go beyond) the minimum goal set forth in the Paris Agreement, “highlighting a crucial ambition gap to be addressed,” the group said in a statement.

Other findings in the report are that 70% of these 161 companies have set long-term emissions reduction targets, 8% ensure their lobbying activities are aligned with necessary steps to address climate change, 40% undertake and disclose climate scenario analysis, and 77% have defined board-level responsibility for climate change.

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The analysis also identified sector-specific trends and best practices, such as identifying companies who nominated a board member or committee with clear responsibility for climate change policy. Mining and metals were found to be the weakest in this category, followed by utilities and power producers, and industrials. Consumer products lead the way in this metric, with over 93% of companies in their assessment found to have delegated such responsibilities.

Those sectors also exhibited the same order of prioritization with regard to setting long-term quantitative targets for reducing greenhouse gas emissions.

The report also identified a few major instances where companies made stellar commitments to green initiatives in recent years. One such example was Volkswagen’s commitment to launch nearly 70 electric vehicle models by 2028, and

Nestlé’s commitment to net zero emissions by 2050. Duke Energy, HeldelbergCement, and Xcel Energy made similar commitments to have net-zero carbons emissions by 2050.

“Climate Action 100+ is the most ambitious investor engagement initiative launched to date—and rightly so given the scale and urgency of the challenge we face,” said Anne Simpson, director of board governance and strategy at the California Public Employees’ Retirement System (CalPERS). The group was initially convened by CalPERS in 2016 during a meeting at the United Nations.

Action on climate change initiatives is running at full speed, as awareness of the issue has now become mainstream and a number of investors are giving the attention real action. Recently a host of high-profile institutions in the UK pledged to determine an investment’s impact on the climate before executing their deals. A proposed bill in the US would mandate companies to disclose climate risk guidelines.