4 Trends Goldman Sachs Says Are Driving S&P 500 Earnings

NEW YORK (TheStreet) -- Sifting through earnings calls is time-consuming. Luckily for you, Goldman Sachs (GS) did the grunt work for the first quarter, identifying trends such as a stronger dollar and lower oil prices that affected Corporate America's financial performance. Some of them may persist for the rest of the year.

Such patterns are analyzed four times a year in the New York-based bank's S&P 500 Beige Book, which reviews executives' statements on quarterly earnings. The first-quarter report, released on Thursday, included excerpts from 61 companies that accounted for almost one-third of total S&P 500 revenue of about $2.6 trillion.

Overall, with 458 of the 500 index companies reporting earnings for the period, sales are down about 3.8% from last year, while profit has climbed 0.3%, according to a Bloomberg analysis.

Following are the trends that Goldman says helped drive those results:

1. Strong dollar weighed on earnings: It wasn't that long ago that U.S. travelers were lamenting the strength of the euro and the high cost of traveling abroad. Now, although travelers may enjoy the lower cost of European travel, their portfolios may be suffering. The strength of the dollar makes U.S. goods more expensive overseas and in turn, hurts international sales.

American Express (AXP) said the U.S. dollar "had a significant impact on our growth rates this quarter. As the dollar continued to strengthen, the magnitude of the foreign-exchange impact increased, and for the first quarter, depressed our growth by nearly four percentage points."

While the U.S. Dollar Index, which measures the greenback against major currencies worldwide, has pared its year-to-date gains in the second quarter,  it remains about 3% higher than at the end of 2014. Executives cited in the Goldman report said they expected it would continue to curb profits in the second quarter.

2. Benefits of lower oil prices yet to be realized: Americans may be paying less at the pump, but those savings have not prompted an increase in consumer spending. Goldman Sachs economists estimate that the 40% drop in oil prices since mid-2014 has translated to a $150 billion "tax cut" for consumers. That money may be going to savings and debt reduction instead of retail goods. Simon Property Group (SPG), a commercial real estate company that operates shopping malls, had this to say:

"We're still dealing with a cautious consumer, it's safe to say, and it's volatile ... Confidence is getting better, but there is still a lot of debt being reduced and it's still a good month, a good week, and then a bad month, a bad week, and the pattern is sloping up, but it's certainly not gangbusters."

3. Winter weather constrained consumer spending: The Northeast saw record levels of snow in the first quarter, which kept many shoppers off the roads and may have contributed to a 1.25% contraction in the economy, according to Goldman Sachs economists. Under Armour (UA) certainly felt the chill:

"Our North American business experienced some disruptions from the West Coast port delays and weather-related store closures during the period, which we estimate had a 1% to 2% cumulative impact on overall net revenues."

4. Cautious optimism regarding European outlook: The European Central Bank's January announcement of its quantitative easing program, purchasing securities to lower interest rates, is rippling through the economy. Goldman Sachs is confident about Europe's recovery, but political tensions in the region may slow progress. Coca-Cola (KO) echoed Goldman Sachs' cautiously optimistic sentiments: 

"There are also some green shoots on the back of monetary easing, but it's early days. That just started. But deflation still remains a concern this year. And overall, consumer spending in Europe, I'd say, is still sluggish, as it will take time for, I think, monetary easing to flow to the consumer pockets and translate into increased consumer spending."

Goldman Sachs also charted the divergence in U.S. and eurozone financial conditions as the U.S. exits its quantitative easing program just as the eurozone starts loosening its monetary policy.

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