SP 500 Weekly Earnings Update: The Bigger Changes Will Probably Come After Next Week

Big week for Financial stocks nect week, so if there are changes to come in forward SP 500  earnings estimates, it will likely start beginning Monday or Tuesday, July 13th or 14th, 2020.

For now though, and to get an early start on the weekend, here are the key numbers from the Refinitiv Earnings Scorecard, which allows me to construct similar data as found in “This Week in Earnings”, with some exceptions.

SP 500 metrics: 

  • The “forward 4-quarter estimate” was $142.98 this week versus the $142.66 last week;
  • The PE ratio using mid-day data today (Friday, July 10th) is 22x versus 22x last week;
  • The SP 500 “forward earnings yield” is 4.53% vs 4.56% last week;
  • The 2021 SP 500 estimate remains above 2019’s $162.93 at $163.32 and that 2021 estimated SP 500 EPS has been right on $163 for the last 5 weeks;
  • The combined 2020 / 2021 estimated SP 500 EPS growth rate average remains at 4% for the 13th straight week;

SP 500 Forward earnings curve: 

click to open / expand / enhance

 

The 5 “forward buckets” for the SP 500 represent somewhat of a moving forward earnings curve for the key benchmark.

Although I’ll feel better about some trends after next week or the week after note the “sequential change” data after Q2 ’20 is cleared. Some of it may be incorporating a Presidential election result, some may be incorporating a gradually improving rate of economic growth, but the 3rd and 4th quarters of 2020 and forward are looking better.

Here is another table that is updated weekly that helps give readers another perspective on Q3 and Q4 ’20:

click to open / enhance / expand

 

The Q3 ’20 and Q4 ’20 and Q3 ‘Revenue and Q4 Revenue expected growth rates are calculated based on current estimates.

The trend is pretty clear, but give it a week and it may be even better.

I particularly like how expected Q3 and Q4 revenue growth rates are improving.

Summary / conclusion: Readers have asked with 1/3rd of the SP 500 companies NOT giving forward guidance, how good are the estimates, but the sell-side analysts still have to make assumptions about units sold, profit margins, expense growth rates, net income growth, etc. etc., thus through this process, the sell-side consensus gets pretty close to financial and business reality. It’s not always perfect and turning points can get gruesome, but the process works and has worked since the late 1970’s and maybe even before that.

Q2 ’20 is expected to be the worst quarter of financial results for the SP 500 since – well – a while, maybe as long as the Great Depression but the Fed’s liquidity programs in combination with the fiscal stimulus (and another round of fiscal stimulus is expected before August 1 to mainstream America), thus I’m fairly sanguine coming into 2nd quarter earnings season.

The Financial stocks are a complete crapshoot since most of their return comes via share buybacks and dividend payments which have been restricted for Q3 ’20, but readers can look for negative commentary and subdued guidance (if any is offered) and then watch the stock price. Stocks that open weak and close higher, on above-average volume are a good tell, particularly if management remains negative. Conversely, watch the Technology sector for strong results, even good guidance, and then if the stocks open higher and close lower on heavy volume, there’s your tell.

Please take all of this commentary with a grain of salt and healthy skepticism. Make your own decisions based on your own risk profile and your own homework. I will offer opinions and objective judgments, which could turn out to be wrong based on reasoned and measured analysis of the data. It happens.

Thanks for reading. Back Sunday with more.

 

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