For the quick answer, actually very little:
- Cons Disc: +9.6% today vs 11.2% on 10/1/21
- Cons Spls: +5.2% today vs 5.1% on 10/1/21
- Energy: +64.6% today vs 55.3% on 10/1/21
- Financials: -5.3% today vs -6% on 10/1/21
- Hlth Care: +10.3% today vs +9.3% on 10/1/21
- Industrials: +12.8% today vs 14.2% on 10/1/21
- Basic Mat: +21.8% today vs 19.2% on 10/1/21
- Real Estate: +12.1% today vs 11.5% on 10/1/21
- Technology: 10.9% today vs 10.7% on 10/1/21
- Comm Services: 9% today vs 11.3% on 10/1/21
- Utilities: +4.2% today vs 3.1% on 10/1/21
- SP 500: +11% today vs 10.6% on 10/1/21
Data sourced from IBES data by Refinitiv as of 10/29/21 and 10/1/21
While the SP 500’s expected Q4 ’21 revenue growth is a smidge higher today versus October 1 ’21, that might be considered a small victory given all the issues around supply chains in transportation, retail and technology. The biggest increases in expected revenue have come from energy, health care and financials. which is still negative, although it’s improved over the last 30 days. Consumer Discretionary was undoubtedly hurt by Amazon’s guide for the December quarter, while Communication Services could be Facebook-related. 8 of the 11 sectors saw increases in their expected Q3 ’21 revenue growth rates over the last 30 days.
I’d call Technology flat.
SP 500 key metrics:
- The forward 4-quarter estimate improved to $215.32 this week vs $214.69 last week. The sequential increases each week are still a positive sign.
- The PE ratio on the forward estimate this week was 21.4x
- The SP 500 earnings yield was 4.68% this week, down from the October 1 high of 4.89%.
- Since we now have a bunch of 3rd quarter bottom-up estimate watchers, the Q3 ’21 bottom up estimate is now $52.38, just $0.20 shy of the $52.58 print for Q2 ’21
2022 SP 500 EPS growth is expected at 10% today, with an SP 500 trading at 21x earnings.
Analysis / conclusion: There are a number of good SP 500 earnings watchers over on Twitter, if you haven’t already found them. I think @EarningsScout is very good. They are very thorough and – like this blog – they analyze the data over different time frames. Also CaM Hui at @HumbleStudent. Cam uses Factset data and is very good too. He employs short-term and longer-term trading models. Nick Colas and Jessica Rabe over at DataTrek (@DatatrekMB) occasionally look at earnings but Nick’s other work is why we subscribe for the reasonable cost of $100 per month. It was Nick that started writing about the Q3 ’21 bottom-up estimate as something to watch for since it was lower than Q2 ’21’s print but Q2 ’21 was a monster quarter for SP 500 and revenue thanks to the very easy compare to Q2’20 and the home run the Big 5 – 6 (Apple, Microsoft, Facebook, Google, Amazon and Tesla) reported in late July ’21. The 3rd quarter bottom-up actual EPS should easily exceed Q2 21’s bottom-up actual by the time the end of November ’21 rolls around.
What’s interesting for me is that for the first time in many years the Big 5 components like Amazon, Facebook and Apple are having issues. I think they are temporary (i.e. 6 – 9 months) but these businesses have seen such remarkable returns on capital and equity and stock returns for the last 5 years it seemed like they could go on forever.
It’s dangerous for me to assume these issues are temporary, too. Labor could be a major issue over the next year.
Could this be the beginning of the end for “growth” investing ? Possibly, but led by Energy and Financials, value investing has had a very good year in 2021 too. Visa is a good example of a classic growth company that is now struggling for the 2nd quarter in a row and has been trapped in a trading range for a while. Management is talking “cross-border” exchange and volume, and it sounds like China. The other thing is Fintech and DeFi could disrupt the “payments technology” sector very quickly although admittedly I know little about the space and what’s driving the innovation. Visa and Mastercard could win too if they can get out front on the disruption.
Visa and Mastercard are very unique companies. They have very little “capex” and as the old saying goes they literally “mint cash(flow)” as the toolbooths for credit card processing. but no one is immune from disruption. What fascinates me is the “Buy Now, Pay Later” functions that are popping up at retailers. Isn’t that the function the credit card performs ?
Anyway, just thinking out loud waiting for football and the NHL to start tonight.
Take everything you read on this blog with a healthy dose of skepticism. None of this is advice. Capital markets change quickly.
Thanks for reading.