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5 prominent U.S. companies are most at fault for the earnings recession



With the S & P 500 suffering from earnings recession for the first time since 2017, a few big names deserve most of the blame.

S & P 500

                            
                            
                                  
      
      
      
      
      
      
      
                                  
                                     SPX, -0.14%

components falling for the second consecutive quarter, a trend referred to as an earnings recession. Profits dropped 0.35% in the second quarter, based on those in the index as of the end of the previous earnings season, following a 0.29% decline in the first quarter.

See more: We are in an earnings recession, and it is expected to get worse

A MarketWatch analysis of FactSet first half of the year: Apple Inc.

                            
                            
                                  
      
      
      
      
      
      
      
                                  
                                     AAPL, -0.14%

Boeing Co.

                            
                            
                                  
      
      
      
      
      
      
      
                                  
                                     BA, -0.46% ,

                            
                                  
      
      
      
      
      
      
      
                                         Exxon Mobile Corp.

                            
                            
                                  
      
      
      
      
      
      
      
                                  
                                     XOM, + 0.29% ,

                            
                                  
      
      
      
      
      
      
      
                                         Facebook Inc.

                            
                            
                                  
      
      
      
      
      
      
      
                                  
                                     FB, -0.49%

and Micron Technology Inc.

                            
                            
                                  
      
      
      
      
      
      
      
                                  
                                     MU, -0.53%

.

Boeing swings to a steep loss in the second quarter due to the grounding of its 737 Max jets for safety reasons, after two deadly crashes. In addition to taking a financial hit as those planes went out of service, the company announced that it would incur greater production costs for these aircraft. A $ 1.9 billion profit a year earlier, making it the biggest contributor to the decline in the second quarter.

See also: Boeing to see $ 5.6 billion hit on 737 Max groundings

Exxon Mobil's profits for the second quarter, a trend the company expects once again as it prepares to release its third-quarter report. Exxon reported "decade-low chemical earnings" in its last report, according to a Raymond James analyst, while overall earnings tumbled 34%.

While Exxon's earnings drop, the market-cap weighting is not the largest in the energy sector of the S & P 500 means the company's results have a sizable impact on the index's overall earnings performance. For example, Noble Energy Inc.

                            
                            
                                  
      
      
      
      
      
      
      
                                  
                                     NBL, -0.68%

suffered a 158% drop in earnings for the second quarter, but its result had a comparably minor effect on S & P 500 profits. Exxon is nearly 30 times the size of Noble.

Apple suffers from a similar issue: While it has not made the most of the troubled technology, the company's gigantic profit totaled 16.4% profit S & P 500's decline in that period. Apple's earnings dropped 14.7% overall in the first half of the calendar year, as its strategy of selling ever-more-expensive smartphones faced with increased pressure in the latest iPhone cycle, compounded by geopolitical tensions with China.

Opinion: Apple iPhone reveals a dramatic change in strategy

Facebook and Micron's earnings slips underscore other issues dogging big tech. Facebook absorbed $ 5 billion in the first half of the year. Though that charge is a one-time issue, the company's regulatory challenges are so far, and so is the growing demand for social-media players.

Micron's earnings have remained under pressure amid a chip inventory that's driving down memory chips, after the cost of memory chips spiked into 2018 and sharply boosted Micron's profit in the previous year. Micron's earnings have declined more than 50% in each of the first two quarters of the year, and it has now pushed the S & P 500 toward a third consecutive quarter of declines by a drop of more than 80% late last month.

Read: Semiconductor stocks are poised to benefit from industry sales growth resumes in 2020

Analysts surveyed by FactSet expect even lower earnings for a third quarter results, which begins to flood this week. Facebook is the only one of the five big contributors that is projected to post a profit increase in the third quarter. Overall earnings for current S & P 500 components are projected to fall 4.88%.

While earnings for S & P 500 companies have declined this year, stock prices have not. The S & P 500 has gained 18.5% so far in 2019, so far this year, counting from a 1.5% increase for Exxon to a 49.5% gain for Apple.


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