SP 500 Earnings Update and a Scary Chart

The “forward 4-qtr estimate” next week (after the quarterly roll) will be $175.69, versus the $176.25 of two weeks ago.

As readers can see, even looking out further than the typical earnings metrics, there is a natural degradation to the SP 500 earnings data each week.

This will be the last week of the Q3 ’19 – Q2 ’20 period, thus next week with the quarterly roll, we will be looking at Q4 ’19 – Q3 ’20 estimates.

SP 500 earnings data (by the numbers): compliments of IBES by Refinitiv

Forward data

  • Fwd 4-qtr est: $170.58 vs last week’s $171.14
  • FWD PE: 17.4x
  • FWD PEG: 15.7x
  • SP 500 earnings yield: 5.76% vs last week’s 5.72%
  • Y-y growth of fwd est: +1.10% vs 1.22% last week

Trailing data

  • TTM 4-qtr est/ actual: $153.31 vs $164.44
  • TTM PE: 18x
  • TTM PEG: 4.5x
  • SP 500 earnings yield: 5.55% vs last week’s 5.50%
  • Y-Y growth of TTM est:  3.82% vs last week’s 4.07%

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From Chris Kimble, an excellent technician who puts his technical analysis work up on Twitter and LinkedIn for all to see.

This chart scares the crap out of me:

Summary / conclusion:  With just one trading day left in the 3rd quarter of 2019, the numbers (Q2 ’19 earnings and revenue) ) are already baked into the market and we now await 3rd quarter, 2019, results due to start October 10th.

The “forward 4-quarter’s estimate” is barely showing an growth over the estimate 52 weeks prior (see last bullet point of “forward data”), which means Street analysts and strategists have really pulled in their growth expectations. Is it the China tariff headlines that are keeping the Street constrained ? Apple’s outsized influence on Technology (after the spinoff of Communication Services sector, Apple is now 20% of the weight of the Technology sector and the Tech sector is still the largest sector within the SP 500 at 20% of the market cap) thus Apple’s iPhone issues are keeping Tech expectations constrained.

The Fed/FOMC has now cut rates twice in the last 6 weeks and the SP 500 hasn’t really traded much above its 3,025 – 3,027 hghs from late July ’19, with the point being that the SP 500 is now lower than when the Fed started cutting rates.

Market breadth and the poor sentiment are allowing the bullish stance to be maintained, given the contrarian nature of sentiment. High yield credit still looks ok too.

The impeachment inquiry is a new fly in the ointment. I was a kid in the 70’s and heard about Watergate every day. Ultimately i hope the inquiry doesn’t impact the US consumer.

Thanks for reading. More to come over the weekend.

 

 

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