SP 500 Earnings Update: Technology Sector Forward Estimates Still Look Good

Thomson Reuters data (by the numbers): (Source: “This Week in Earnings” dated 9/1/17): 

Fwd 4-qtr est: $138.18

P.E ratio: 18(x)

PEG ratio: 1.82(x)

SP 500 earnings yield: 5.58% vs last week’s 5.67%

Year-over-year growth of fwd est: +9.82% vs 9.95% from last week 

Analysis: nothing really new in the numbers as – per Thomson – just 2 SP 500 companies are set to report this coming week. With nonfarm payroll data out of the way, and just 2 SP 500 components set to report earnings, headlines will rule the week, so to speak.

Running through the weekend reading at breakfast on Saturday morning, the continued upward revision in Technology sector earnings caught my eye.

  • Q2 ’18: 11.5% expected vs 13.6% on July 1 ’17
  • Q1 ’18: 12.3% expected vs. 10.7% as of July 1 ’17
  • Q4 ’17: 11.3% expected vs 10.4% as of July 1 ’17
  • Q3 ’17: 9.7% expected vs 9.0% as of July 1 ’17
  • Q2 ’17: +16.7% (actual) vs 11.2% expected as of July 1 ’17

Apple is expected to update the Street in iPhone 8 September 12th, ’17. What worries me is that sentiment is now off-the-charts bullish, almost the complete opposite of last year at this exact same time, when the last iteration was expected for the iPhone 7, expectations were quite low, and the stock (AAPL) was trading between $100 – $110. (Here are a couple of blog posts discussing Apple last August 16,  August 18, and September, ’16.)

The Technology sector revisions are similar to a year ago, the difference this year being Technology is the top performing SP 500 sector, and last year it wasn’t, thus expectations are higher.

Remember – and this is the key point of the post – the fact that forward quarter’s Tech sector growth rates have been revised UPWARD is very unusual and a positive sign. In normal years and normal quarters, the typical pattern of earnings revisions is downward until the quarter starts to get reported, and then upward revisions occur.

My experience with tracking the numbers over so many years, these out-and-out higher upward revisions usually indicate increased confidence by analysts.

The fact that the Nasdaq closed at an all-time-high Thursday and Friday this week, supports or reflects the Tech sector earnings trends.

We’ll see though – September 12th and iPhone 8 update will be important.

Thanks for reading,,,

 

 

 

 

 

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