SP 500 Earnings Update: Street Still Expecting 9% – 10% SP 500 Earnings Growth in 2019

With the 3rd quarter in the books for the most part, the 28% y/y earnings growth for the SP 500 (per IBES by Refinitiv) will be strongest rate of earnings growth for the key benchmark since – well – the spreadsheet goes all the way back to the 4th quarter of 2011 and nothing comes close to 2018’s SP 500 earnings growth.

At the start of the quarter, IBES by Refinitiv was expecting 21.6% SP 500 earnings growth on 7.5% revenue growth, and now “actual” SP 500 earnings with just 5 weeks left to go in the quarter and 484 SP 500 companies having reported, is +28.2% on 8.5% revenue growth.

As some have suggested Q3 ’18 is probably the peak in “year-over-year growth” in SP 500 earnings, but absolute earnings (actual dollar estimates) will continue to work higher.

Street consensus for 2019 SP 500 earnings growth: 

  • 11/23/2018: +9%
  • 9/28/2018: +10%
  • 6/29/2018: +10%
  • 3/30/18: +10%
  • 12/29/17: +10%

The consensus for 2019 has changed little in the last 45 weeks per the data tracked weekly.

SP 500 Weekly Earnings Update: (IBES by Refinitiv)

  • Fwd 4-qtr est: $171.28 down from last week’s $171.79
  • 4-qtr trail est: $157.78 vs last week’s $157.73
  • PE ratio: 15.3x
  • PEG ratio: 1.80x
  • SP 500 earnings yield: 6.5% the highest yield since late October’s 6.52%
  • Year-over-year growth of fwd est: +8.6%

Summary / conclusion: observant readers will note the addition of a new metric for the growth rate of the forward estimate, which now uses the “4-quarter trailing” EPS number as the base for the growth rate, rather than the prior years forward 4-quarter estimate. One of the aspects to tracking data i have always been uncomfortable with is comparing an “estimate” to an earlier “estimate” and then noting the growth difference. Even with 4-quarter trailing data though, that still happens but to a smaller degree. For instance the 4-quarter trailing EPS estimate is the sum of Q4 ’17 through Q3 ’18, and with Q3 ’18 still reporting results that quarter’s estimate will change every week until 12/31/18.

What this change will prevent is sharp changes in growth rates at the beginning of each quarter, since the calculation will now have a rolling aspect to the forward estimate. For example, the full-year 2018 EPS estimated earnings growth has been 22% – 25% for since early January, 2018. 2019’s estimates earnings growth is what is listed above in the first bullet points.

Comparing the forward estimate today to a forward estimate 52-weeks prior is a little like calculating convexity on a bond or bond portfolio: the rate of change is being measured rather than an absolute change of the estimate.

The “4-quarter” trailing” versus the “forward 4-quarter” estimate will reduce some of the sharp quarterly growth rate changes and provide readers a smoothed or more realistic growth rate looking forward. (This data was always captured in the annual EPS estimates, as noted above.)

What’s remarkable about the earnings data for Q4 ’18 is that the Energy estimated earnings growth rate has risen since October 1 ’18.

Out with more over the weekend.

Thanks for reading. Hope this post wasn’t too technical.


One Response to “SP 500 Earnings Update: Street Still Expecting 9% – 10% SP 500 Earnings Growth in 2019”

  1. Todd Henning

    I would love to see a blog on breadth and portfolio positioning now. Looks like some WS firms may show even weaker earnings growth next year than the current 9-10% estimates. (down to 2-3%) Momentum is finally breaking down. Also, in the next month, a review of the W.S. consensus forecasts for 2019 would be nice.


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