SP 500 Earnings Update: SP 500 PE now 17x, Earnings Yield at 5.85% and Forward Estimates Rise Again

The true dichotomy in 2022’s stock market is that SP 500 forward estimates continue to be revised higher, while the SP 500 sinks lower.

The spreads between large-cap growth and value is very wide this year too. (The style-box analysis will be out tomorrow. Here is a look at the 3/31/22 style-box update.)

At some point, something has to give between SP 500 EPS estimates and the indices.

The SP 500 is trading at 17x the forward SP 500 EPS estimate, down from a PE peak in the low 20x in late ’21.

As this blog has explained to readers over time, don’t use this blog as a “market timing” tool. Use it as one important, fundamental piece of your market view. Sometimes – like 2008 – the SP 500 EPS estimates can be deceptive – and as it was eventually learned, erroneous.

Bespoke had an interesting line on the first page of the Bespoke Report this weekend: “Who would have ever thought that coming out of Covid would prove to be more difficult than Covid itself ?”

Here’s 3 charts from the weekly Bespoke Report that – in my opinion – are quite telling:

Source: Bespoke Report

What was interesting about this past week, – the 6th consecutive week of declines for the major stock market indices – was that the 10-year Treasury yield rallied from last week’s 3.12% – 3.13% to this week’s 2.93%. That 10-year Treasury yield has been backing up every week during this stock market slide, as was noted in the weekly post from last week. This past week, the SPY fell about 2% while the TLT (Treasury +20-year ETF) rallied +1.5%.

SP 500 EPS data: (IBES data by Refinitiv)

  • The forward 4-quarter estimate rose this past week to $235.25 vs last week’s $234.44 and the 12/31/21 estimate of $216.14;
  • The PE ratio on the forward estimate is now 17x, versus the 22x that began 2022;
  • The SP 500 earnings yield is now 5.85%, versus last weeks 5.69% and 12/31/21’s 4.54%;
  • The Q1 ’22 bottom-up estimate increased again to $54.89 from last weeks $54.41 and 4/1/22’s $51.54;

Quarterly estimated SP 500 EPS and revenue growth rates

(Data source is Refinitiv’s “Earnings Scorecard”)

Readers know that this is one of my preferred tables or format’s since it gives estimated revenue growth rates by quarter for the SP 500.

Revenue growth rates have actually risen for 2022, quarter’s 2 – 4, while EPS growth rates have been revised a little lower.

A reader might say, “well that’s all Energy” but energy remains just 5% – 5% of the SP 500 by market cap weight.

Summary / conclusion: The SP 500 is trading at 17x forward EPS for an SP 500 that is expected to grow EPS in 2022 between 9% – 10% as it stands currently. The tech sector’s expected EPS growth for full-year 2022 is still 8.9%, which was the exact same full-year 2022 expected growth rate for the sector as last week.

The style-box analysis coming out tomorrow should show the continued strong “average, annual” returns for large-cap growth, which is one reason the big indices are struggling, mid-cap and small-cap aren’t exactly shooting the lights out.

The one statistic that has stood out for me personally since early in 2022 was from a good technical analyst who told me that a 1/3rd retracement of the SP 500’s path from the March ’20 lows to the early January ’22 all-time-high, would be a pullback to the 3,800 level on the SP 500. I suspect that represents a “fibonacci level” and what struck was the simple symmetry of the move.

This week the SP 500 dipped below 4,000 so we we’re getting close. Is this level meaningful ? We’ll find out.

More to come over the weekend.

Remember, past performance is no guarantee of future results and none of this is a recommendation to buy, hold or sell anything. This blog is written as a way to force me to keep up with the earnings data and grind out the numbers.

Nearly every single bond asset class and every single stock category is negative YTD. The dollar – as measured by the UUP – is up 9% though.

Think about that.

The title of today’s article might imply bullishness: just giving you the facts. Be sure and draw your own conclusions.

Thanks for reading.


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