Q2 earnings season may look a lot like Q1 as companies once again face the twin drags of the energy downturn and strong U.S. dollar.

The Thomson-tracked consensus is calling for a 3% year-over-year decline in S&P 500 earnings for the second quarter, dragged down once again by the energy sector and a strong U.S. dollar. We believe this earnings estimate can be exceeded due to the improving economic growth in the U.S. and Europe during Q2, and the low bar set by an above-average 4:1 ratio of negative-to-positive preannouncements (long-term average back to 1995 is 2.7) and recent earnings trends where the average upside “beat” over the past 16 quarters is 4%. An upside in-line with prior quarters would leave earnings up by 1 – 2% compared with Q2 2014, similar to the Q1 result (+2%). The biggest stories this earnings season will again be energy and the dollar, which are expected to combine for a roughly 10% drag on S&P 500 earnings overall. But these drags will potentially share the spotlight with two others: Greece and China. We expect corporate America to tell us that the knock-on effects on their businesses from turmoil in Greece and the bursting of China’s stock market bubble have been very limited and that earnings are poised to accelerate during the second half of the year.

According to the Thomson-tracked consensus, the strongest earnings growth in Q2 is expected to come from the financials and consumer discretionary sectors…

Q2 Earnings Preview