NEW YORK, July 26 (Reuters) - The S&P 500 index is on track to post back-to-back, double-digit quarterly earnings growth for the first time in almost six years, and the trend could continue as a weak U.S. dollar and global growth help boost results.
More companies are beating analyst estimates than the recent average, and they are doing it by wider margins than they have since 2010, according to Reuters data.
But the better news for corporate America may be that the dollar weakness, expected to be sustained the rest of the year, has not been fully priced into estimates, providing the S&P 500 with a further earnings boost.
The U.S. dollar index fell 6.44 percent this year to the end of June, marking its largest first-half percentage decline since a 6.5 percent drop in 2006. The 4.7-percent drop in the second quarter of 2017 was the largest for any quarter since the third of 2010.
"The move in the dollar was much more significant and much more rapid in the second quarter than people were anticipating, and is certainly helping second-quarter earnings growth," said Erin Browne, global macro portfolio manager at UBS O'Connor in New York.
She said equity analysts are not yet forecasting the greenback to remain pressured the rest of the year, "so I think there is additional upside to second-half earnings as analysts update their estimates to reflect a persistently weaker dollar."
A softer U.S. currency means that companies' foreign sales translate to more dollars in their earnings reports. The year-on-year comparisons are favorable because last year the dollar weakened in the first half but rallied in the second.
The U.S. currency is expected to remain weak, according to a Reuters poll. U.S. inflation has not taken off as previously thought, and President Donald Trump's reflationary policies have hit a series of political obstacles.
With just under half of S&P 500 components having reported June-quarter results already, earnings growth stands at 10.5 percent, according to Thomson Reuters I/B/E/S data. The blended estimate - earnings and expected earnings - is 10.7 percent.
A double-digit increase, following the 15.3 percent growth of the first quarter, would mark the first consecutive increase over 10 percent since the second and third quarters of 2011.
Overseas growth, especially in Europe, has also been a boon for S&P earnings and could continue to be. On Monday, the International Monetary Fund revised growth expectations for the euro zone and China higher.
Aside from the weaker dollar, "the other trend has been the upturn in the global economy," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama. "So that's a double benefit for large companies."
A steady recovery in demand from China was cited by Caterpillar earlier this week when it posted earnings that beat expectations and raised its 2017 forecast.
The quality of earnings beats has also been greater than in recent quarters.
Boeing on Wednesday said cash from operations, at nearly $5 billion in the quarter, was roughly double estimates of about $2.5 billion and it lifted its full-year forecast for core earnings. Its shares rallied almost 10 percent, the most for any day in almost nine years.
Microsoft said last week its net income more than doubled in the quarter to $6.51 billion and earnings per share increased by nearly 40 percent on the back of its fast-growing cloud computing business.
So far, 74 percent of companies' earnings beat expectations, above the 71 percent average over the past four quarters.
The surprise factor, the percentage by which those earnings have beat, is currently 6.6 percent - matching the highest since the third quarter of 2010.
The tech sector, the largest of the S&P 500, so far has the highest surprise factor at 14 percent.
(Repotring by Rodrigo Campos and Kimberly Chin, additional reporting by Caroline Valetkevitch and Chuck Mikolajczak; Editing by Nick Zieminski)