The Alcoa (AA - Analyst Report) report, after the close on July 8th, will put the spotlight on the Q2 earnings season, but the reporting season will really get going the following week. Below, you can see the weekly reporting calendar for companies in the S&P 500 index, and as you can see we will get results from more than 40 index members that week.

Alcoa is expected to report 23 cents in EPS on $5.7 billion in revenues, which would compare to 18 cents in EPS on $5.8 billion in revenues in the year-earlier quarter. Estimates have been under pressure given the commodity price headwinds, which has been the key factor in the stock’s recent underperformance as well. But the negative revisions to the company’s Q2 earnings estimates aren’t just an Alcoa affair, estimates have been coming down for most companies.

What is expected for Q2?

Total earnings for the S&P 500 index are expected to be down -6.7% from the same period last year on -6% lower revenues. The growth weakness is broad-based, with 9 of the 16 sectors expected to suffer earnings declines. As was the case in Q1, the Energy sector is the biggest drag, with total earnings for the sector expected be down -64% on -41.5% lower revenues. Excluding Energy, total earnings for the S&P 500 would be essentially flat from the period last year (up +0.5% on -0.3% lower revenues).

The table below provides a summary picture of Q2 expectations contrasted with what was actually achieved in the preceding quarter.

Of the major sectors, the Technology sector’s total earnings are expected to be down -1.6% on +0.8% higher revenues, with strong gains at Apple (AAPL - Analyst Report) offset by weakness at Qualcomm (QCOM - Analyst Report) and IBM (IBM - Analyst Report). For the Finance sector, earnings are expected to be up +2.6% on -5% lower revenues.

Putting Q2 Estimate Revisions in Context

The fact that Q2 estimates came down over the last three months is not something unique to this period. This has been the norm for quite some time now and has become particularly entrenched over the last couple of years as management teams have been consistently providing weak guidance, causing estimates to come down.

One could cite a variety of reasons for why the tone and substance of management guidance has been this week lately, but the most logical though cynical explanation is that management teams have a big incentive to manage expectations. After all, it pays to under-promise and over-deliver.

The chart below shows this trend clearly. The dark green column shows the earnings growth expected at the start of the quarter; the orange column shows the growth rate expected by the time the earnings season gets underway and the shaded green column shows the actual growth achieved that quarter. For 2015 Q2, we started out at an estimated earnings decline of -4.3% on March 31st, with the earnings drop estimate going further down to -6.7% as of today. But if history is any guide, then the actual growth rate will likely be in the vicinity of where we started out in early April. Other than 2014 Q4, this has been the pattern repeatedly in recent quarters.

But if Q2 earnings growth does end up around where we started the quarter, then it will be the lowest earnings growth pace in quite a while.

Keep in mind however that while the trend of negative revisions is no different from other recent periods, the magnitude of negative revisions for 2015 Q2 is notably lower relative to what we saw ahead of the Q1 earnings season.

The chart below shows the magnitude of negative revisions for each quarter since 2013 Q2. As you can see, the magnitude of negative revisions for 2015 Q2 (shaded orange bar: -3.1%) is materially below what saw in 2015 Q1 (-8.3%) and 2014 Q4 (-5.9%). Please note that the ‘average’ represents the average for the 7-quarter period through 2015 Q1.

Bottom line, estimates for Q2 have not fallen as much as had been the trend in the last couple of quarters. But they are nevertheless down. The revisions trend is broad based, with estimates for most sectors down from early January. The Energy sector’s travails are fairly well understood, but estimates for other sectors have come down quite a bit as well.

The chart below identifies the major sectors that have suffered pronounced negative revisions.

This pronounced downshift in estimates has prompted some on Wall Street to start claiming that the revisions trend may have a gone bit too much; meaning that estimates have likely become too low. Hard to find a basis for such a claim in real time, particularly given the global growth woes and still-high U.S dollar. But we will find soon enough as actual Q2 results start coming in.

Note: For a complete analysis of 2015 Q2 estimates and actual result for the preceding results, please check out weekly Earnings Trends report.

Here is a list of the 13 companies reporting this week, including 3 S&P 500 members.