SP 500 Earnings: Forward Estimate Jumps to $174.87

As we rolled into the new quarter this week, the period for measuring the “forward 4-quarter estimate” rolled forward from Q2 ’19 through Q1 ’20, to Q3 ’19 through Q2 ’20.

That means the “forward 4-quarter” estimate rolled from last week’s $170.63 to this week’s new $174.87, or an increase of $4 and change, as we expected to happen a few weeks ago here. ( The original estimate was for $175 – $176 so will readers say $174.87 is close enough for government work ? )

SP 500 data by the numbers: 

  • Fwd 4-qtr est: $174.87 vs last week’s $170.63
  • PE ratio: 17x
  • PEG ratio: 2.41x
  • SP 500 earnings yield: +5.85% vs last week’s 5.81%
  • Year-over-year growth of the fwd est: +3.95% vs last week’s +3.94%

(Source: This Week in Earnings, IBES by Refinitiv)

Summary / Conclusion:  The two metrics that jumped out this week are the sharp drop in the PEG ratio, to a more normal 2.5x this week, but maybe more importantly, the “SP 500 earnings yield” rose on the week to 5.85% despite the 2.4% increase in both the SP 500 and the Nasdaq.

The reason the SP 500 earnings yield jumped is that the forward 4-quarter estimate jumped more than the indices, thus the market’s valuation fell a little despite the higher week for stock prices.

Expectation for “forward” SP 500 earnings growth haven’t been this low since late 2015, early 2016.

2019’s “expected” full-year 2019 earnings growth is now expected at just 2%, the first drop in 16 weeks after staying stable at 3%.

Expect better SP 500 earnings as we move through the 2nd half of 2019 as was discussed here.

Thanks for reading.


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