SP 500 Weekly Earnings Update: High-Single Digit Earnings Growth the “New Normal” for SP 500 ?

A little over half the SP 500 has reported their Q4 ’16 with 275 SP 500 components releasing results as of Friday, February 3rd, 2016.

Per Thomson’s earnings date, year-over-year growth in SP 500 earnings is 8%, with revenue growth of 4%.

It does appear that Q4 ’16 will equal or exceed the 8% growth in Q3 ’16, noting our January 1 ’17 blog post here.

Here is the latest Thomson Reuters I/B/E/S data (by the numbers):

Forward 4-quarter estimate: $131.95 down from last week’s $132.91 

P.E ratio: 17.4(x)

PEG ratio: 2.5(x) – continues to normalize towards 2.0(x)

SP 500 earnings yield: +5.74%, down from last week’s +5.79%

Year-over-year growth rate of the forward estimate: +7.71% down from last week’s 8% print.

Analysis / conclusion: Client meetings and report preparation have kept the calendar full since the start of the year. The earnings season will start to turn towards companies reporting their January ’17 fiscal year-end or quarter-end, which means that we’ll start to hear from retailers in the next few weeks.

The big reports this coming week will be General Motors (GM) and Coca-Cola (KO). Of the two GM is by far the bigger holding in client accounts, although with Muhtar Kent announcing his departure and Howard Buffett leaving the Coke board, the hope was that this quarter’s conference call might give some indication of what “new Coke” might look like, if there will ever be a “new Coke”.

Whole Foods (WFM), a beaten-down higher-end grocery chain also reports this week.

Disney also reports this week, and they look to have turned around the ESPN “cord-cutting” related weakness.

There is one aspect to the numbers that is somewhat bothersome: Q3 ’16 SP 500 earnings rose roughly 8%, Q4 ’16 is on track to grow the same amount, and full-year 2017 is on track to grown 7.9% – 8%.

With the Energy sector drag gone, 7% – 8% is now the “expected” range of SP 500 earnings.

More to come on this topic.

(Long, GM, KO)

 

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