SP 500 Weekly Earnings Update: A Quick Look at the SP 500 Forward Earnings Curve

Next week, as we roll into the 3rd quarter of 2018, the “forward 4-quarter estimate” should jump to (approximately) $168 per share, which is the sum of Thomson Reuters IBES’s quarterly estimates for Q3 ’18, through Q2 ’19.

Looking at the next two “forward 4-quarter estimates here is what they look like currently:

  • Q3 ’18 – Q2 ’19: $168 and change
  • Q4 ’18 – Q3 ’19: $172.50
  • Calendar 2019: $176.91

(Source: Thomson Reuters IBES currently quarterly bottom up and annual estimates as of June 29, 1918.)

Readers have to remember though, these estimates change daily with analyst’s updating their models, company preannouncements, (good and bad), and competitor news.

It’s a fluid game, like investing itself.

Readers can see the steady progression higher – the growth rate will eventually revert to 7% – 10% – once we lap the reduction in the corporate income tax, but SP 500 EPS estimates should work higher.

Weekly update of the SP 500 metrics:

  • Fwd 4-qtr est:  $164.16 vs last week’s $163.93 (the new estimate next Friday will be the above referenced $168 and change)
  • P.E ratio: 16.7x
  • PEG ratio: 0.76x
  • SP 500 earnings yield: +5.99%, vs last week’s 5.95%
  • Year-over-year growth of fwd estimate: +21.84% vs 21.68% from last week

The PEG ratio has now been under 1.0x for 21 consecutive weeks per the internal spreadsheet. Readers may ask why the PEG is so low and thus why haven’t stocks done better (for most of the 1990’s the SP 500’s PEG was closer to 2.0x, versus today’s under 1.0x value) and my own guess is that “the market” sees today’s SP 500 earnings growth as a function of the corporate income tax rate reduction, which will eventually end after we roll into 2019, versus organic revenue growth like we saw in the 1990’s, particularly from large-cap Tech.

That’s just an opinion.

There will be a blog post every day this weekend since it is easier to write when the market is closed.

Thanks for reading.

 

Leave a Reply