SP 500 Weekly Earnings Update: Nothing Has Really Changed in Numbers (Yet)

Thomson Reuters data (by the numbers from This Week in Earnings, dated 12/15/17):

  • Fwd 4-qtr est: $142.57
  • P.E ratio: 18.8x
  • PEG ratio: 1.72x
  • SP 500 earnings yield: +5.32%
  • Year-over-year growth of fwd est: +10.9% vs last week’s +10.9%

Analysis / summary: With just two weeks left in 2017, the forward estimate growth rate is almost exactly in line with the bottom-up SP 500 EPS estimated growth rate for 2018 of 11%. This 11% expected growth rate hasnt changed much in the last 18 months, varying from expected growth of 10% next year to 12% and now at 11%, since July ’17, even with expected tax reform.

The year-over-year growth rate of the forward estimate has been above 10% since October 20, ’17, the first “above 10%” streak since – well – quite a while. The forward estimate growth rate got close to 9% in Sept ’14, and then as high as 8% in 2013, but since the Financial Crisis has spent little time in even the high single digits expected growth range – until late 2017. (Wish a graph or chart could be shown for readers, but the Excel spreadsheet is running out of room across the columns, and it has been reconfigured numerous times over the near 20 years earnings data has been kept.)

Truly, I wonder to the extent the forward estimates will change once the actual tax reform bill is signed into low. One comment heard yesterday – CNBC I believe – was that cash repatriation would be taxed at a rate much higher than the 10% penalty tax that was expected. (Double-checked after publication of this blog, and per a Financial Times article, the proposed cash repatriation tax rate is 15.5% for liquid assets, higher than the original number of 10%, and a 7.5% additional surcharge on less liquid assets.)

Today’s update is the same old story, but nonetheless a good story.

I expect the actual tax reform bill signed into law will change the forward estimates.

Micron (MU), Bed Bath & Beyond (BBBY), FedEx (FDX) and Nike (NKE) all report this coming week. It’s a good cross section of the economy with companies from the Technology, Staples, Consumer Discretionary and Transportation sectors reporting. (Long a little FDX and NKE).

Thanks for reading.




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