A couple of corrections for readers:
- Q3 ’16 Sp 500 earnings are up +3%, and NOT +3.6% as was detailed in yesterday’s headline;
- In the October 2nd blog post linked yesterday, this sentence, “If we add or average the Thomson and Factset expectations for Q3 ’16, -1.3% is the expected growth rate, thus adding back the “average” surprise factor of +4.3%, investors should expect about +3% for Q3 ’15 when the quarter is fully reported by December 31 ’16.” the Q3 ’15 in the latter part of the sentence should in fact be “Q3 ’16”. (The forecast was exactly right for readers, just a type needed to be corrected.)
- Regarding the timing of the Friday earnings announcements like Chevron (CVX), Exxon (XOM) and McKesson (MCK), etc. those earnings are in fact included in the sector growth rates of the Friday night printing of “This Week in Earnings”. Readers were erroneously told that the data was cut off Thursday night of each week. In fact, per David Aurelio of Thomson Reuters, only the “bottom up EPS and the P.E ratio” are as of Thursday night.
Here is historical and projected SP 500 earnings and revenue growth rates, sent by Thomson Reuters:
| S&P 500 Y/Y Growth Rates | ||||
| Source: Thomson Reuters I/B/E/S | ||||
| Earnings | Revenue | |||
| Period | S&P 500 | Ex-Energy | S&P 500 | Ex-Energy |
| 2018Q2E | 11.0% | 9.5% | 4.1% | 4.9% |
| 2018Q1E | 11.8% | 9.7% | 5.2% | 4.8% |
| 2017Q4E | 13.7% | 11.2% | 5.3% | 4.0% |
| 2017Q3E | 10.8% | 7.6% | 6.4% | 3.9% |
| 2017Q2E | 11.9% | 8.3% | 6.4% | 4.1% |
| 2017Q1E | 14.2% | 10.3% | 8.4% | 5.6% |
| 2016Q4E | 7.4% | 7.5% | 5.1% | 4.9% |
| 2016Q3E | 3.0% | 6.7% | 2.5% | 4.4% |
| 2016Q2 | -2.1% | 2.2% | -0.4% | 2.5% |
| 2016Q1 | -5.0% | 0.4% | -1.7% | 1.5% |
| 2015Q4 | -2.9% | 3.4% | -3.5% | 0.9% |
| 2015Q3 | -0.8% | 6.3% | -4.4% | 1.0% |
| 2015Q2 | 1.3% | 8.9% | -3.5% | 1.5% |
| 2015Q1 | 2.2% | 10.3% | -3.1% | 2.4% |
| 2014Q4 | 7.0% | 10.5% | 2.1% | 4.8% |
| 2014Q3 | 10.3% | 10.3% | 4.1% | 5.3% |
| 2014Q2 | 8.6% | 7.5% | 4.7% | 4.9% |
| 2014Q1 | 5.6% | 6.5% | 2.9% | 3.4% |
| 2013Q4 | 9.9% | 12.6% | 1.0% | 1.7% |
| 2013Q3 | 6.0% | 8.0% | 3.4% | 3.7% |
| 2013Q2 | 4.9% | 6.7% | 2.2% | 3.6% |
| 2013Q1 | 5.4% | 6.1% | 0.0% | 3.2% |
| 2012Q4 | 6.2% | 6.2% | 3.6% | 6.3% |
| 2012Q3 | 0.1% | 2.9% | -0.8% | 2.0% |
| 2012Q2 | 8.3% | 13.3% | 0.9% | 3.6% |
| 2012Q1 | 8.1% | 9.2% | 5.0% | 5.2% |
| 2011Q4 | 9.2% | 8.6% | 6.9% | 5.7% |
| 2011Q3 | 18.0% | 13.0% | 11.1% | 8.6% |
| 2011Q2 | 12.1% | 8.3% | 13.6% | 10.6% |
| 2011Q1 | 18.9% | 16.4% | 9.4% | 6.7% |
| 2010Q4 | 37.0% | 36.3% | 8.2% | 6.9% |
| 2010Q3 | 31.2% | 31.0% | 7.5% | 6.2% |
| 2010Q2 | 38.8% | 33.4% | 8.8% | 6.4% |
| 2010Q1 | 58.3% | 57.4% | 11.2% | 8.1% |
| 2009Q4 | 205.6% | 414.6% | 7.9% | 8.9% |
| 2009Q3 | -14.7% | 0.9% | -10.0% | -2.4% |
| 2009Q2 | -27.3% | -17.6% | -14.2% | -6.6% |
| 2009Q1 | -35.5% | -30.1% | -11.4% | -5.5% |
| 2008Q4 | -67.0% | -77.6% | -9.5% | -7.3% |
| 2008Q3 | -19.0% | -32.2% | 8.1% | 2.1% |
| 2008Q2 | -22.1% | -29.7% | 10.1% | 4.8% |
| 2008Q1 | -17.5% | -24.2% | 7.6% | 3.6% |
Source: Thomson Reuters
Conclusion: David Aurelio of Thomson Reuters was kind enough to provide the above table, since the goal for readers was to show some update and perspective on how the SP 500 looked “Ex-Energy”.
With the SP 500 earnings growth “Ex-Energy” +6.7% in fact the 3rd quarter of 2016 is showing pretty healthy earnings (and revenue) growth and if you look historically since 2008, SP 500 earnings and revenue have returned to the mid to high end of the 7 – 8 year range.
Note how Q4 ’16 is expected to “equalize” with Energy, meaning that the Energy sector will return to being additive, or at least not a substantial drag on SP 500 earnings in 2017.
The question remains, ‘to what degree does Energy add to SP 500 earnings in Q4 ’16 and 2017 ?”
Revenue growth, ex-Energy is 4.4% in Q3 ’16 – not bad. Likely helped by Financials.
SP 500 earnings have been healthy, and while it is likely the election that has the market chopping and on tenterhooks, I still expect a decent 4th quarter really into year-end 2016.
Given the political flame-throwing, an election surprise might roil the markets too.