SP 500 Weekly Earnings Update: Whatever the Stock Market’s Issue, It isn’t Earnings

Ironic that the SP 500 and the major equity indices are correcting – with the SP 500 falling below its 5-day moving average this week – for the first time since the Presidential election, in front of what will likely be the strongest year-over-year quarter of earnings growth since early-to-mid 2014.

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

  • Forward 4-quarter estimate: $135.18, up from last week’s $135.14 and again showing sequential strength
  • P.E ratio: 17(x)
  • PEG ratio: 2.0 (x)
  • SP 500 earnings yield: 5.80%, up from last week’s 5.74%
  • Year-over-year growth of the forward estimate: 8.25%, down 1 basis point from last week’s 8.30%

Thomson Reuters published “This Week in Earnings” Thursday night given the Good Friday market holiday so we received the typical week-ending SP 500 earnings data a day early.

With several of the big bank’s reporting their Q1 ’17 quarters before the open on Thursday, April 13th, the numbers look good and the Financial sector should see a steady-to-higher drift in Q1 ’17 earnings growth estimates into the next week or two.

Readers need to know that – even without any tax reform built into the SP 500 earnings estimates – as of right now 2017 is expecting the strongest year of earnings growth for the benchmark since 2010’s 40% y.y growth rate, and that 40% was only because 2008 and 2009 were down 30% – 35% cumulatively.

The sector distortions caused by the Energy sector will dissipate with 2017 earnings and this should be a robust year for earnings growth.

Whether the SP 500 P.E expands or contracts in the face of this, is another question.

More to come Saturday and Sunday of Easter weekend.

Enjoy the 3-day holiday and “thank you” for reading.




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