US companies are expected to report their worst sales decline in nearly six years when they post second-quarter results, giving investors reason to worry about future profits.
US firms have managed to drive 2015 earnings by cutting costs, a practice they turned to during the financial crisis. They have also used share buybacks to lift earnings per share.
But it is hard to make a case for sustained earnings growth given forecasts for a second quarter of revenue decline in a row at S&P 500 companies, which begin reporting financial results in earnest this week.
Though analysts expect corporate America to show a decline in second-quarter profits, according to Thomson Reuters data, some strategists expect them to defy those forecasts and eke out a gain, just as they did in the first quarter.
The question is how long S&P 500 companies can outrun a downturn in sales, which have been hit by a fall in energy company revenues and a strong US dollar.
This second quarter reporting period is expected to mark the 16th quarter in which sales performance has lagged that of earnings for S&P 500 companies.
Q2 S&P 500 revenue is expected to have fallen 3.9% from a year ago, according to Thomson Reuters data, marking the steepest decline since the third quarter of 2009. That follows a 3.1% slide in first quarter sales.
Q2 earnings are expected to have fallen 2.9% after a 2.2% rise in profits during the first quarter, when analysts had also forecasted an earnings decline.
