A Longer Look at Annual SP 500 Earnings Numbers, Paying Attention to 2017

Occasionally it helps to take a step back and look at the annual SP 500 earnings data:

2017: $134.26 – (est) 14% SP 500 earnings growth expected next year

2016: $117.94 – est. Another year of 0% – 1% growth expected this year. Full-year 2016 EPS will be known by mid-March ’17

2015: $117.46 – actual – -1% growth in 2015

2014: $118.78 – actual – +8% growth in 2014

2013: $109.68 – actual – +6% growth in 2013

2012: $103.80 – actual – +6% growth in 2012

2011: $97.82 – actual – +15% growth in 2011

A couple thoughts:

  • Post-2008 bank charges, both litigation and Justice penalties severely hampered the Financial sector’s earnings growth, which impacted the SP 500 overall.
  • Investors haven’t seen a year of double-digit earnings growth since 2011, and that was Energy-driven.
  • Investors are looking at two years of flat SP 500 earnings growth in 2015 and 2016, thanks primarily to collapse of Energy sector’s earnings.
  • During this last 5 – 6 year period, HealthCare and Consumer Discretionary have both put up decent growth, as has Technology.

What’s up with 2017 ? 

It is the 2017 estimate that began to get my attention earlier this year, when I wasn’t seeing the typical downward revision pressure that usually happens throughout a calendar year.

To keep this short and sweet, here is the progression on the full-year 2017 SP 500 EPS estimate:

9/2/16: $134.26

8/5/16: $134.51

7/1/16: $135.28

6/3/16: $135.67

5/6/16: $135.42

4/1/16: $136.44

3/4/216: $137.12

2/5/16: $138.79

1/1/16: $142.82

The key takeaway from this is that, since late March, early April ’16, the 2017 SP 500 EPS estimate has eroded very little, which should be giving readers more confidence that the SP 500 in 2017 will see double-digit earnings growth next year.

With Q3 ’16 earnings results some companies will start to give 2017 guidance. However the great majority of 2017 guidance will come in January – February ’17, with Q4 ’16 earnings. However most analysts will know by January 1 ’17 within a reasonable degree of confidence, how their coverage, sectors and companies will perform next year.

The annual EPS estimate’s are just one metric. The real “tell” for me here after looking at this data for 15 years is that the rate of deterioration for next year is very small relative to “typical” or standard rates of deterioration.

I still think much depends on Energy’s revenue and earnings growth for 2017. It is almost inconceivable to think Energy will do worse in 2017 than the first half of 2016.

 

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