Buybacks could drive Q3 earnings: Bank of America

NEW YORK (Reuters) - Bank of America-Merrill Lynch on Monday wrote that buyback programs could drive third-quarter earnings above expectations, though the twin headwinds of lower oil and a stronger dollar could limit the upside surprise.

"Though they slowed from (the second quarter), we estimate that buybacks still boosted earnings per share growth by 1.5-2.0 percent" in the third quarter, Bank of America wrote in a note. "Early results are also encouraging, supporting our expectations for a beat: nearly 70 percent of stocks with August quarter-ends have positively surprised on earnings per share."

The firm estimates earnings of $30 per share for the S&P 500, which it wrote represented a beat rate of 3 percent over its consensus estimate of $29.03 per share.

The consensus given by Bank of America implies growth of 4 percent, which is under the 6.4 percent growth rate estimated by Thomson Reuters data. At the start of the year, Thomson data indicated earnings would grow by 12.7 percent.

BofA said the energy sector was one of the least attractive to own, citing the impact of weaker oil prices. "Unlike in 2Q, when higher oil prices benefited energy and drove about half of the pickup in overall S&P earnings growth," crude oil fell 13.5 percent in the third quarter.

Separately, the U.S. Dollar index rose 7.7 percent in the third quarter, which could also limit earnings growth. "Analysts have begun to cut estimates for companies with high exposure to the euro, yen, or emerging currencies, particularly amid weakness in Europe and China," it wrote.

Alcoa Inc , Costco Wholesale Corp and Monsanto Co are all scheduled to report this week, though the season begins in earnest next week, with a number of bellwether companies set to report.

Index snapshot at 12:27 EDT:

* S&P 500 was falling 3.64 points, or 0.18 percent.

* Nasdaq Comp was losing 15.21 points, or 0.34 percent.

* Dow industrials was dropping 23.44 points, or 0.14 percent.

* Russell 2000 was falling 6.42 points, or 0.58 percent.

* S&P MidCap was dropping 2.42 points, or 0.18 percent.

* S&P SmallCap was losing 3.48 points, or 0.55 percent.

(Editing by Chris Reese)