3.8.14: SP 500 Earnings Update: Q1 ’14 Earnings Growth Continues to Deflate

Per ThomsonReuter’s “This Week in Earnings” the SP 500’s forward quarter estimate fell $0.32 this past week to $118.87 from $119.19.

The p.e ratio on the forward estimate is now 15.8(x) as of Friday, March 7, 2014.

The PEG ratio is now 2.58(x), exactly the same as last week.

The “earnings yield” on the SP 500 is 6.33%.

More importantly, the year-over-year growth rate on the forward 4-quarter estimate is now 6.11% versus 6.05%.


  • Consistent with last week’s conclusion, 2014’s SP 500 earnings growth is going to be back-end loaded.
  • q4 ’13’s y/y earnings growth with 493 companies having reported is 9.8%, just a smidge shy of our 10% prediction;
  • q1 ’14’s earnings growth is now expected at +2.4%, which will be the lowest rate of growth since q3 ’12;
  • Average the two quarters and I expect we’ll see 6% – 7% when q1 ’14 is all reported by late June ’14
  • The biggest sector change between q4 ’13 and q1 ’14 is Financial sector earnings growth, which grew 25% in q4 ’13, but is only expected to grow 3.4% in q1 ’14;
  • The worst sector for q1 ’14 expected earnings growth is Energy with a decline of 5.8% expected currently, while Telco is expected to be up 11.8%. After Telco the next best growth rate for q1 ’14 is Ute’s at 7.3% and Consumer Discretionary at 6%.
  • Utilities (Ute’s) is the only sector with positive revisions since January 1 ’14.

The week after next we hear from Oracle, (ORCL), Lennar (LEN), Fed-Ex (FDX) and Nike (NKE) within a 3-day period.

Next week, we hear from more retail like Williams-Sonoma (WSM), but we will be paying attention to UNFI too, which is one of Whole Foods (WFM) largest suppliers. We don’t own or follow UNFI any longer (haven’t for years) but when I was modeling the company WFM was something to the effect of 1/4 to 1/3rd of all UNFI’s revenues. UNFI’s results will give another look at Whole Food’s business, not to mention whether the other specialty / organic retailers are growing as well. The Fresh Market (TFM) missed with their financial report Thursday night, and the stock was down 2% Friday. Pricey retail like organic continues to feel the weather-related pain.

Thanks for reading the Weekly Earnings Update.

Trinity Asset management, Inc. by:

Brian Gilmartin, CFA

Portfolio manager



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