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An energy jolt of a different sort: Why earnings are taking a hit

It's now been more than a year since crude oil began its vertigo-inducing plunge. Yet S&P 500 Index earnings continue to remind one of the classic joke that references the assassination of America's 16th president: "Other than that, how was the play, Mrs. Lincoln?"

Based on a mix between the reported earnings and the expectations for those results yet to released, S&P 500 companies are currently slated to report a 2.2 percent drop in earnings for the second quarter, according to FactSet. That would represent the first earnings decline since the third quarter of 2012.

Of course, that earnings growth number is likely to rise further as more companies unveil results—and could wind up in positive territory by the time all the earnings are out—given that companies tend to beat.

However, what's striking is how different that number looks once energy names are excluded. Thanks to a collapse in the price of oil, the energy sector is slated to report a monster 54 percent drop in earnings and 28 percent swoon in revenue, compared to the second quarter in the year prior.

Excluding energy, then, the S&P 500 would be looking at earnings growth of 4.1 percent. Meanwhile, revenue growth expectations would go from negative 4 percent to positive 1.8 percent, according to FactSet's senior earnings analyst, John Butters. The glum backdrop raises the stakes for the coming week, with oil giants like ExxonMobil and Chevron set to report quarterly results.

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"The energy sector is reporting the largest year-over-year decline in earnings and revenues of all 10 sectors," Butters wrote in his weekly report.

"This sector is also the largest contributor to the year-over-year decline in both earnings and revenues for the S&P 500 as a whole," he added.

Of course, it can be all too easy for investors to do their best Johnny Mercer impression and simply "Ac-Cent-Tchu-ate the Positive"—twisting reality to suit a bullish investment thesis.

And investors who have exposure to the S&P 500 as a whole are indeed missing out on the higher underlying earnings they would have seen had oil prices had remained high.

That said, even with such a sharp decline in S&P 500 earnings, it shouldn't be interpreted as a direct sign the economy is slowing. After all, most Americans can be thought of as having a "short" rather than "long" exposure to oil prices, benefiting when oil prices fall in the form of lower gas prices.

Read MoreFalling gas prices not doing much for the economy

While a decline in earnings would be disheartening, however, it might say more about one battered industry than about the strength of the U.S. economy.

All is not yet lost

Natural gas is flared off at Apache Corp.'s Deadwood natural gas plant in Garden City, Texas.
Getty Images
Natural gas is flared off at Apache Corp.'s Deadwood natural gas plant in Garden City, Texas.

On the whole, however, second-quarter earnings season has gotten off to a reasonably good start. About 74 percent of the first 186 S&P 500 companies to report beating earnings expectations, according to Thomson Reuters I/B/E/S—slightly above historical norms.

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The revenue picture is a bit murkier, with only 52 percent of companies beating sales estimates, well below the historical average of 61 percent.

And those companies that do miss on earnings are getting punished for it dearly, according to Jonathan Golub of RBC Capital Markets. Those few companies missing on the bottom line have tended to fall 3.5 percent, versus an average historical drop of 2.4 percent.

—By CNBC's Alex Rosenberg.

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