This month we analyze first quarter earnings and dig into the impact of oil prices. As we have suggested, markets ultimately trade on earnings, and this quarter the picture has been clouded by the rapid decline in the energy sector.

1. Slides of the Month – June 2015
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Overview: We believe corporate earnings – specifically the level of earnings
growth – is one of the most important factors in assessing the health of the
equity markets and related economy. With an understanding that equity
prices are ultimately dictated by earnings, we pay close attention to this
trend. While S&P 500 earnings seemed sluggish in Q1, this is in part a result of
the impact declining oil prices had on energy sector earnings. This factor
weighed heavily on overall market earnings growth, and this month we
dissect the true nature of first quarter earnings.

2. With almost all of the S&P 500 companies having reported Q1 2015 earnings, the results appear to be lackluster,
with negative sales growth and earnings growth of just 0.48%.
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An Earnings Update…
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3. • While a cursory look at the recent
earnings results may be cause for
concern, this earnings malaise is
not broad based.
• This chart shows reported sales
and earnings growth for the S&P
500 excluding the energy sector.
In this case, sales growth was
2.05% and earnings grew at 7.88%.
• Excluding energy, general earnings
growth appears relatively healthy.
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Excluding Energy, Q1 Earnings Growth Increased to 8.5%
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4. Experience Insight Impact
The Fundamentals for U.S. Companies in the S&P Remain Strong
Operating Profit
Margins near peak
levels (energy
weakness has caused
a 1% decline off the
recent peak).
Corporate
balance sheets
have greatly de‐
levered over
recent years as
indicated by the
Net Debt to
EBITDA ratio.
Cash flow per
share has backed
off of all time
highs, but is still
significantly above
historical averages.
S&P 500 total
dividends have risen to
new highs, yet dividend
yield remains
reasonable at around
2.0% current year.
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5. Valuation
The current S&P multiple of 18.7x is trending upward as the market continues to rebound. From a long term
historical context, the S&P 500 looks to be slightly above averages, although not at prior extreme levels.
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6. Future Market Expectations
As the second half of the year approaches, earnings are expected to rebound from very muted first half expectations. As a
result of continued negative impact of energy related companies, this transition is expected to take several quarters.
Q1 2015
Average
Sales
Average
Earnings
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7. Conclusion: Excluding energy, the results of first quarter earnings were reasonably healthy.
Furthermore, fundamentals in the U.S. appear to be positive. Nonetheless, with valuations
slightly above historical averages, we believe we’ll need to see earnings growth continue if the
U.S. market is to advance further. In the meantime, we continue to closely monitor economic
trends and the impact of a decline in oil prices.
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Market Perspectives – June 2015
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8. Opinions expressed in this commentary may change as conditions warrant and is for informational
purposes only. Information contained herein is not intended to be personal investment advice for any
specific person for any particular purpose. We utilize information sources that we believe to be reliable
but cannot guarantee the accuracy of those sources. Past performance is no guarantee of future
performance; investing involves risk and may result in loss of capital. Consider seeking advice from a
professional before implementing any investing strategy.
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Disclaimer
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