Weekly Earnings Update: Q4 ’16 Revenue Growth 5% Expected, Strongest Since Q1 ’12 (but read fine print)

Typically, there is always one or two data points that jump out from the Thomson or Factset earnings summaries which come out each Friday afternoon.

This week, it was noted on page 5 of the Factset Earnings Insight, that Q4 ’16 revenue is expected to be 5%, the first time the SP 500 has seen two consecutive quarters of year-over-year revenue growth since the 3rd and 4th quarter of 2014, and the strongest year-over-year revenue growth since Q1 ’12.

That is a long time.

What is somewhat suspect is that – per Factset – Utilities are the primary driver of this 5% growth, with expected growth in Q4 ’16 of 19.5%. The next highest sector is 6.8%, and that is Consumer Discretionary, and the big weight in that sector is Amazon (AMZN). (Haven’t owned a utility in years, but long AMZN.)

Since the election came almost exactly halfway through the quarter, not all of the growth was post November 8th. It does look like the US economy was starting to heat up prior to November 8th.

We’ll see if the FOMC addresses this acceleration in their remarks on Wednesday, December 14th. We can probably assume the FOMC will life the fed funds rate by 25 bp’s Wednesday, December 14th.

Thomson Reuters data (by the numbers): 

  • Forward 4-quarter estimate: $128.51 versus last week’s $128.61
  • P.E Ratio: 17.5(x)
    PEG ratio: 4.2(x)
  • SP 500 earnings yield: 5.69%
  • Year-over-year growth of forward estimate: +4.19% vs last week’s +4.15% 

Analysis / conclusion: The growth in the forward estimate is finally headed the right direction, but it won’t really move until tax reform is underway and there is a broad outline of tax cuts, repatriation, etc. This is now a time where the Weekly Earnings Update actually is less meaningful and “P.E expansion” is more meaningful as the market will be moving ahead based on lower taxes, less regulation, etc. not to be undone hopefully by bad trade decisions.

I’ll be keeping an eye on the sector data, but again this becomes less meaningful, although still interesting to look at and analyze.

Sounds like OPEC and non-OPEC producing nations struck another output deal late Friday or early Saturday morning. Let’s see what crude does Monday morning. It needs to break out out of this $50 – $52 area that has been resistance for a while.

Thanks for reading.



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