SP 500 Earnings Update: An Early Look at 2016

FC2016(ests)92315

The above spreadsheet, gives an early look at what consensus analyst expectations are expecting for 2016.

A couple caveats for readers:

1.) These estimates are constantly changing;

2.) 2016 sector estimates won’t get much freight until the Q3 ’15 earnings start to get reported in mid-October, and really wont get traction until the Q4 ’15 earnings get reported in January – February ’16, when management give somewhat-concrete full-year 2016 guidance. Some management’s will give 2016 guidance as soon as October – November ’15 earnings, but most will defer until Q4 ’15 results. Still to further complicate the picture, analysts will still build their 2016 models, which we can monitor changes in the sector estimates as we move through October – November ’15.

Both Thomson Reuters and Factset data were put up for readers perusal, since i wanted readers to see the close proximity of the estimates as they stand currently.

My early (and possibly quite wrong conclusions) about 2016 earnings, given the above data:

1.) Continue to stay away from the Energy sector. It isnt the absolute level of Energy earnings growth that worries me, but the “rate of change” or rather continued rate of negative revisions, which still isn’t stabilizing. Crude oil looks to be finding a bottom in the low $40’s, but that is read on the technicals, which shouldn’t be taken to the bank.

2.) In Q1 ’15 (not shown), SP 500 earnings grew +11% Ex-Energy and Ex-Apple, (long AAPL), and grew 9% in Q2 ’15. Right now, even at that run-rate of earnings, 2016 could show “mid-single-digit” earnings growth, with very little recovery in energy.

3.) No other sector absent Energy is seeing large revisions for 2016. Given their market cap weight, key on Financials and Technology.

The financial media loves to sell fear and anxiety.

A lot can happen between now and January ’16, but the expectation is that SP 500 earnings in 2016 will at least be mid-single-digits and with a little help from Energy, might be a little better.

Technology and Financials remain client’s two largest overweight’s. Both these sectors had their horrific bear markets between 2000 and 2009, and both sectors have – for the most part – attractive valuations, and favorable risk / reward. Both sectors still comprise 40% of the SP 500 by market cap.

These early opinions force me to put pen to paper and examine the data.

 

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