It might be hardly worth mentioning but looking at the data every week, it’s important to distinguish sentiment from reality and for the Energy and Tech sectors there has been a little bit of softening in Q2 and Q3 ’18’s expected earnings growth rates:
Since July 1 ’18 Q2 ’18:
- Energy’s expected growth rate is now expected at +123.7% as of 8/3/18 vs the 140.9% as of July 1.
- Technology’s expected growth rate is now expected at 25.4% as of 8/3/18 vs 25.5% as of July 1.
There are three of the 11 SP 500 sectors that show stronger revisions for Q3 ’18, which is unusual since – at this time of the quarter – the pattern is typically that investors will see negative revisions (i.e. downward or sequentially lower growth rates ) for the quarter until that earnings season begins.
The there sectors seeing upwardly revised growth rates for Q3 ’18 are Financial’s, Health Care and Telco.
(Source: Thomson Reuters IBES, “This Week in Earnings”)
SP 500 earnings data (by the numbers):
- Fwd 4-qtr est: $169.24 vs last week’s $168.88
- PE ratio: 16.7x
- PEG ratio:0.75x
- SP 500 earnings yield: +5.97%
- Year-over-year growth of fwd est: +22.27% vs last week’s +22.23%
The year-over-year growth of the forward estimate hit an all-time-high this week of 22.27% which is worth mentioning. Remember the last bullet point is the forward estimate, or Q3 ’18 through Q2 ’19. The slight softening in the Tech numbers is interesting given Apple’s results this past week. Despite the Street lifting EPS and revenue estimates for 2018 and 2019 for Apple, the Tech’s sectors expected growth for Q2 ’18 fell a little and the q3 ’18 stayed flat.
It’s probably nothing right now, but if the revision patterns persist we’ll break them out for readers.
The softening at the margins for Tech and Energy could simply be a case of high expectations.
Thanks for reading,