This graph, which appears weekly on the first page of I/B/E/S by Refinitv’s “This Week’s in Earnings” sometimes tells a better story than the written word, so it is posted this week to show readers that the share-weighted earnings (in US dollars) recovery is real and it shouldn’t be too long before the SP 500 dollar earnings exceed the February 1 ’19 level.
SP 500 earnings are digging out of a Q4 ’18 / Q1 ’19 hole but I expect the full-year 2019 SP 500 earnings to be at least high-single-digits by the time we get to the back-half of 2019.
Q1 ’19 earnings – quick recap:
- The SP 500 is currently expecting 1% y/y growth for SP 500 earnings as a whole, as of Friday, May 3rd, 2019;
- The sectors that have shown further downward revisions since reporting are Energy, Communication Services and Utilities;
- Health Care (rather than the Financial sector) now has the highest expected earnings growth for Q1 ’19 at +9.9%, more than double it’s expected growth rate of +4.5% as of Q1 ’19.
- Technology earnings expected growth for Q1 ’19 jumped from -6.1% as of April 1 to -2.2% as of May 3rd, 2019
Here is how Technology sector earnings look for Q2, Q3 and Q4 ’19:
- Q2 ’19: -7.4% vs -5.8% as of April 1
- Q3 ’19: -4% vs -3.5% as of April 1
- Q4 ’19: +6.3% vs +6.1% as of April 1 ’19;
- 2019 as a whole ? Tech’s earnings growth rate is expected to remain negative at -1.5% vs -1.9% as of April 1;
Summary / conclusion: Apple’s forward earnings curve (the EPS for each quarter the next 6 quarters out) saw slightly lower EPS revisions following the fiscal Q2 ’19 report, but really not enough to be material, and similar to Amazon’s forward estimates which were also revised slightly lower. (Long a lot more Amazon than Apple, trimming Apple significantly in the last 12 months.)
One of the ways for users to use this blog over the long run (which has been written about before) is to note which sectors are seeing upward revisions to estimates while the SP 500 as a whole might be seeing flat or lower expected growth. Here is how expected sector growth rates have changed for full-year 2019 growth rates since April 1:
- Cons Disc: +7.4% vs 6.8% as of April 1;
- Energy: -7.8% vs -11% as of April 1;
- Financials: +9.1% vs +8.8% as of April 1 (Berkshire’s earnings release will impact this expected growth rate next week – BRKA is the largest financial stock in the SP 500)
- Health Care: +6.1% vs +5.5% as of April 1;
- Real Estate: +4% vs +3.8% as of April 1;
- Technology: -1.5% vs -1.9% as of April 1;
- SP 500: +3.1% vs +3.3%
The Financial sector is still expecting the strongest rate of earnings growth of the 11 SP 500 sectors for calendar 2019.
DataTrek Research is a neat little blog I’ve stumbled upon in the last few months. Here is what this blog had to stay about Technology last week:
“Disruption: Last year’s S&P sector reclassifications make it difficult to know the true weighting of Technology in global equity market indices. We ran the numbers; the S&P 500 is actually 31% Tech (not the official 22%) and Emerging Markets are close behind at 29% (not 14.5%). US small caps (Russell 2000) have a 16.5% “real Tech” weight and EAFE equities are underweight at just 7.0%. We still believe that US large cap Tech is the primary driver of global equity outperformance so we favor the S&P 500 over all these other options. It is, however, very much a concentrated bet and only getting more so with time.”
Here is what DataTrek had to say about the rest of the SP 500 performance as of the end of April ’19:
It’s a neat little blog. It’s a quick read packed with useful info as far as i can tell. I’d encourage readers to take a two-week trial and see what you think. (No affiliation with the blog whatsoever.)
Thanks for reading – more to come Sunday, May 5th, 2019.