Q4 ’18 SP 500 Earnings Begin This Week

At least 22 large-cap Financials report this coming week and for clients, JP Morgan (JPM) and Charles Schwab (SCHW) are the most important.

These positions aren’t really traded and have been core holdings for years, and even though the Financial sector looks technically dubious, and didn’t really get the bounce expected with the latest 10% SP 500 rally to start 2019, the plan is to keep the core holdings intact.

The Financial sector had a tough 2018 returning -13% (and all of it coming in the 4th quarter, 2018) but Financials are expected to grow EPS 9% – 10% in 2019, still ahead of the SP 500.

It’s hard to sell the sector after 2008 – 2009: nothing will ever be as bad for Financials as we saw in 2007 – 2009.

Here is the SP 500 data by the numbers:

Fwd 4-tr est: $172.15 vs $173.54

PE ratio: 15x

PEG ratio: 2.47x

SP 500 earnings yield: 6.63% vs last week’s 6.85%

Y-o-y growth of the fwd est: 6.1% vs last week’s 6.7%

Source: I/B/E/S for Refinitiv

Summary / Conclusion: If 2019 SP 500 estimates have made a low in terms of expected growth for the coming year, with the Street expecting just 6.1% as of this week, then readers should know it shortly, and certainly by the end of the coming week, with Financials still being 13% of the market cap weight of the SP 500.

Ex tax-reform, per Factset, the SP 500 earnings growth for 2018, was or will be 14% – 15%, once we get all the Q4 ’18 earnings data.

Expectations for 2019 are pretty subdued already, and that is always a plus.

I couldn’t find the chart or the rationale, but Bespoke noted this week that typically when analyst’s get this conservative about quarterly earnings, it bodes well for the pending results, which in this case would be the 4th quarter’s numbers.

Take this along with all forecasts and opinions with a substantial dose of pessimism, but I think 2019 SP 500 earnings will steadily get stronger through the year as the Fed, China, the shutdown and then Brexit get resolved, and will end up 2019 better than 10%, maybe even low teens.

Too much negative sentiment right now.

Thanks for reading.

4 Responses to “Q4 ’18 SP 500 Earnings Begin This Week”

  1. joseph guido

    I agree with you, not just because I want, although I do.

  2. Robert Meyer

    Do you know where I can download free weekly historical fwd earnings estimates and fwd estimates revisions breadth (net higher or lower) data? If not free, then a retail product?

    • Brian Gilmartin

      try ycharts but def not free. not sure anyone offers this free. Refinitiv (the old Thomson Reuters) is what ive used for 20 years.


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