This weakness in the year-over-year growth rate of the SP 500 forward estimate is worth mentioning, but there is a lot of distortions in earnings in Q1 ’15 given the dollar, Energy, Bank forex write-offs thanks to even more (!) litigation: the hits just keep on coming.
However the noise in the Q1 ’15 data should be getting washed out via the forward growth rate and the estimate is still persistently weak. When we were in the midst of the tax increases, the fiscal cliff, yada, yada, yada, the forward growth rate never went negative. We saw the earnings “pessimism” in the financial media, just not a negative growth rate in the forward estimate.
Here are the numbers, per Thomson’s This Week in Earnings:
Forward 4-quarter estimate: $122.17, down from last week’s $122.23.
P.E Ratio: 17.32
PEG ratio: -25.38, which is negative thanks to growth rate of the forward estimate. Dividing the today’s P.E by the Ex-Energy, +7.2% growth rate of SP 500 earnings in Q1 1’5, gets us to 2.4(x), which is still high.
Sp 500 earnings yield: 5.77%. (Remember, the other way to derive the earnings yield is simply take the inverse of the P.E ratio)
Y/Y growth rate of forward estimate:-0.68%, lower than the -0.51% last week.
Analysis / conclusion: I dont think we’ve had two consecutive weeks of the y/ growth rate of the forward estimate since the forward earnings estimate turned higher in the late Spring, 2009. We had one week in August, 2012, where it drifted close to zero, but that is about it.
I’d like to see the growth rate turn higher shortly. Remember, this rate is the “forward 4-quarter estimate” today, versus the same forward 4-quarter estimate 52 weeks ago.
52 weeks ago, the forward 4-quarter estimate was looking for 8% – 9% SP 500 earnings growth, not knowing what was in store for the Energy sector and the price of crude oil.
This “noise” in the forward earnings estimate could be one reason the Sp 500 has been range bound this year, and the SP 500 hasn’t broken out to all-time highs.
Simply thinking out loud about the data.
Q1 ’15 earnings growth Ex-Energy is +7%, exactly where we thought it would be in early April ’15.