The investment world has embarked upon the second-quarter 2016 earnings season or the quarter ended Jun 30, 2016. The interest of investors at this time mainly hovers around the performance of companies in comparison to Street estimates. Stocks of companies that meet or beat expectations are rewarded with surging prices while the ones that miss, see falling share prices. No matter whether the results are good or bad, the reporting period keeps investors busy in rebalancing their portfolios.

Per the latest Earnings Trend Report (as of Jul 15, 2016), 36 S&P 500 members – that account for 10.1% of the index’s total market capitalization – reported earnings results. Total earnings for these index members were down 3.9% while revenues have fallen 0.1%, with 66.7% beating EPS estimates and 47.1% beating revenue estimates. The percentage of companies that have been able to beat both EPS and revenue estimates is tracking 33.3% at this stage.

This clearly reveals a negative trend so far in the quarter. Looking at the second quarter as a whole and putting together the actual results of 36 index members with estimates for the upcoming 464 companies, total S&P 500 earnings are expected to be down 5.4% on 0.5% lower revenues, with 9 of the 16 Zacks sectors anticipated to post earnings decline in the quarter.

Coming to the broader sector for the Household industry – Consumer Discretionary – has seen nearly 5.7% of its members report their second-quarter results, of which 100% beat on earnings and 50% surpassed revenue estimates. Additionally, the blended beat, which is the percentage of companies that were able to beat both EPS and revenue estimates, stands at 50% for the sector. However, total earnings for these companies were up only 15.2% year over year, with revenues improving 5.1%.

Though this reflects a positive picture thus far, we think it is too early to determine any trend for this sector as a major chunk of earnings from this sector is still to come. The second-quarter forecasts show that earnings for the Consumer Discretionary sector are expected to drop 1.3%, whereas revenues are anticipated to increase 3.4%.

Of the earnings to be reported this week, we will focus on Household stocks Whirlpool Corporation WHR and Select Comfort Corporation SCSS, which are slated to report second-quarter 2016 results on Jul 19 and Jul 20, respectively.

To start with Whirlpool, we are unsure whether this home appliances manufacturer and seller will be able to post a positive earnings surprise in the quarter to be reported. The company’s past performance reveals that it has outperformed the Zacks Consensus Estimate by an average of 2.6% over the trailing four quarters, with a beat in three quarters. Whirlpool recently eased investors of their worries regarding the impact of Brexit on its U.K. operations. The company continues to battle foreign currency headwinds and weak emerging market demand, which marred its sales in the last quarter and is expected to linger through the rest of 2016.

WHIRLPOOL CORP Price and EPS Surprise

WHIRLPOOL CORP Price and EPS Surprise | WHIRLPOOL CORP Quote

Nonetheless, we applaud Whirlpool’s strategic endeavors to improve margins on the back of cost-and capacity-reduction initiatives, encouraging price/mix, growth in adjacent businesses, and synergies arising from the integration of acquisitions. Though the company carries a Zacks Rank #3, our criteria of earnings beat has been let down by an Earnings ESP of -0.30%. (Read more: Whirlpool Q2 Earnings: What's in Store After Brexit?)

Next, Select Comfort has outperformed the Zacks Consensus Estimate by an average of 54.19% over the past four quarters, with a beat in each quarter. Though this sleep solutions provider carries a Zacks Rank #1, our prediction of earnings beat has been let down by an Earnings ESP of 0.00%. The company’s Most Accurate estimate and the Zacks Consensus Estimate – both stand at 1 cent. Select Comfort posted strong earnings in first-quarter 2016, delivering positive earnings surprise of 35%. It indicated that its ERP system implementation is over and customer-service levels have normalized. This marked the last step in the company’s transformation plan and it expects to realize greater operating efficiencies in the latter half of 2016.

SELECT COMFORT Price and EPS Surprise

SELECT COMFORT Price and EPS Surprise | SELECT COMFORT Quote

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