SP 500 Earnings Weekly Update: Forward Revisions Continue to Portend Positively

Here’s a quick rundown of the weekly stats:

  • SP 500’s “Forward 4-quarter estimate” ended this week at $128.34 vs $128.45
  • Remember on July 1 the forward estimate will “roll” from the period covering Q2 ’20 to Q1 ’21, to Q3 ’20 – Q2’21. (See the forward estimate below for that bucket’s “forward 4-qtr estimate”, which is currently $143.20.)
  • For the 9th straight week, the “average” expected SP 500 earnings growth for both 2020 and 2021 is 4%. That hasn’t changed since mid-April ’20.
  • What the simple average tells me is that the relationship between the 2020 and 2021 SP 500 estimates has not changed.
  • The expected 2020 SP 500 EPS is still hovering around $125, which has been stable for 5 weeks.
  • The expected 2021 SP 500 EPS of $163.99 is still above the 2019 final EPS print of $162.93. I think that’s important – no one else really does, though.
  •   The “rate of change” continues to improve for SP 500 earnings. Here’s a look at the SP 500 “forward earnings curve”.
  • click to open / expand / enhance

    (Source data: IBES by Refinitiv, 618/20)

Summary / conclusion: The SP 500 rise 1.8% this week and corporate bond returns improved this week, both of which are positive for capital markets. The SP 500 earnings revisions continue to bode well for “expected, future returns” for the SP 500, but that isn’t a prediction, simply an observation.

The SP 500 earnings yield continues to sit at depressed levels at 4.14%, but if we plugged in next quarter’s “forward 4-quarter estimate” of $143.20, the SP 500 earnings yield jumps to 4.6% versus the 4.1% today.

Nike (NKE) and Accenture (ACN) report this week, and then FedEx (FDX) and Micron Technology next week. Nike will give is a look into China.

All of this can change very quickly, and it’s one opinion, so invest according to your own financial profile.

Thanks for reading.

 

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