How much of a risk is an earnings recession for U.S. stocks?

Earnings for S&P 500 companies are expected to grow at the slowest rate in years, raising the spectre of an "earnings recession."

Is Corporate America at risk of an earnings recession?

Barclays Capital predicts that earnings at S&P 500 companies will shrink within the second quarter, with analysts expecting earnings per share for the 350 companies on the index to shrink by an average of 3.8 per cent.

“Financial performance, as measured by revenue growth and earnings per share growth, isn\’t expected to be great in 2Q15,” said Barclays strategists led by Jonathan Glionna in a note to clients. “Both sales and EPS are predicted to say no, based on bottom-up consensus estimates.”

If there\’s one thing the stock exchange has been in a position to count on previously few years, it’s been strong corporate earnings growth.

Low interest rates, an improving labour market and lots of corporate cash to deploy have meant robust earnings. Investors, consequently, have been rewarded for purchasing U.S. stocks.

But two bad quarters have some analysts questioning whether an earnings recession can be done for Corporate America. An earnings recession happens when a year’s total earnings decline compared to the previous year.

Barclays Capital isn’t with an earnings recession, but it sees a tough year ahead for growth. It lowered its EPS estimate for the S&P 500 to US$123 from US$125. That means growth of five per cent for the year, notably down from the double-digit growth of past years.

“One year ago, the beginning of second quarter earnings season would be a cause for optimism,” said Glionna. “The S&P 500 had been up 6% around the year and EPS was poised to grow 10%. Now, the S&P 500 expires just 1% in 2015 and EPS isn\’t growing.”

Barclays Capital does, however, see a bit of upside for U.S. stocks in the next six months. It forecasts the S&P 500 can finish the year at 2,100, up from its current level of?2,075.69 as of 11:30 a.m. on Thursday.