SP 500 Earnings Update: Forward 4-Quarter Growth Rate Still Positive

Thomson Reuters Data by the numbers:

  • Forward 4-quarter estimate: $121.90 versus $122.50 last week
  • P.E ratio: 15.3(x)
  • PEG ratio: 11(x) given the low forward growth rate
  • SP 500 earnings yield: 6.54% versus last week’s 6.52%
  • Growth rate of forward estimate: +1.38%, versus last week’s +1.75%

Analysis: The year-over-year growth rate of the forward estimate is still positive, but it has now declined for the 3rd straight week. Here is the recent pattern of the growth rate of the forward estimate:

2/12/16: +1.38%

2/5/16: +1.75%

1/29/16: +2.08%

1/22/16 +1.67%

1/15/16: +1.3%

12/11/15: -0.71%

11/13/15: -2.01%

While unchanged from exactly one-month ago, the y/y growth rate has risen gradually since mid-October, 2015, which was the point in 2014, when the Energy sector estimates began to decline precipitously.

If Energy would just stabilize, and the dollar weaken, we could see the y/y growth rate of the forward estimate continue to improve.

Readers need to be reminded, that the y/y growth rate has been negative since early April, 2015. I do think the SP 500’s 1% return in 2015 was partially due to the flat earnings growth in calendar ’15.

Published last Wednesday night here, the drop in Financial sector earnings growth in Q4 ’15 is the biggest negative surprise, with the sector down to just 2% earnings growth, versus the 10% expected.

Conclusion: The big news this week (for me anyway) was the hold for the SP 500 at 1,812, and the hold for crude oil at the $28 level. What fascinates me is the bearishness around crude – does it do any good to be apocalyptic here in terms of the crude price ? I get the supply issue. As of this weekend, Q1 ’16 earnings growth for Energy is expected to be -87%, down from -61% on Wednesday. As bad as the estimates are, Energy is down roughly 7% YTD, versus Financials being down 15% and Technology 11%. (Source – Bespoke Report).

WalMart (WMT) reports this week. $500 billion in annual revenues, still far bigger by revenue than Amazon (AMZN).

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