SP 500 Weekly Earnings Update: Forward Estimate Growth Rate Showing Signs of a Bottom

First order of business this week is to relay to readers a note received this past week, from John Butters, the Factset principal behind Factset’s weekly “Earnings Inisght” report.

John sent me an email this week, saying that Factset did not state that 2018’s “organic” growth rate for SP 500 earnings was 14%, a figure I’ve been using on this blog for several months.

John said that Factset has not published an official tax-cut-adjusted SP 500 earnings growth figure for 2018. IBES by Refinitiv (the old Thomson Reuters division) and Factset’s Earnings Insight are the two primary sources for earnings detail, with sources always disclosed. Because of discretion around what can be “operating” versus non-operating earnings, this blog is always careful where earnings data is sourced.

In my own defense, I could have sworn i read this in a Factset Earnings Insight report earlier in 2019, and there wasn’t a lot of ink devoted to the disclosure, but rather just one line in the “Earnings Insight” commentary. ( I remember thinking at the time, it was puzzling why Factset didn’t make a bigger deal around the disclosure.)

However, the clarification has to be disclosed to readers since a number of blog posts have quoted this figure.

This blog will not be using the 2018 SP 500 “organic” growth rate of 14% again.

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SP 500 Earnings data – by the numbers: 

  • Fwd 4-qtr est: $171.79 vs last week’s $171.89
  • PE ratio: 18.3x
  • PEG ratio: 42.3x
  • SP 500 earnings yld: 5.46% vs last week’s 5.47%
  • Y/y growth of fwd est: (0.43% vs 0.51% last week (why the PEG is so high is that this y/y growth of the forward estimate is that this compares this week’s forward estimate with the same estimate 52 weeks prior. 18x PE / 0.43% = 42x)

 

  • TTM est: $163.89 vs last week’s $163.88
  • TTM PE: 19x
  • TTM PEG: 3.8x
  • SP 500 earnings yld: 5.21% vs 5.22% last week
  • Y/y growth of TTM est: Dividend the forward estimate of $171.79 vs the TTM actual EPS of $163.89 leaves us with 4.82% growth vs 4.89% from last week

Year-over-year change in SP 500 earnings growth starting to improve ?

click to open / enlarge / enhance

 

This part of the SP 500 earnings tracking spreadsheet was shown a few weeks ago, and it appears that as of 11/1/19, the y/y change in the forward estimate’s growth rate appears to have bottomed. This number peaked almost one year ago almost exactly coincident with the market peak in 2018, before the 4th quarter correction.

The best result we can hope for is that we continue to see the “1-year chg %” continue to expand.

That’s not a prediction, but “green shoots” with three weeks left in December ’19.

Summary / conclusion: Next week we will hear from Toll Brothers (TOL) and Costco (COST) in terms of names we regularly follow for clients, although nothing is planned with either name. In the next few weeks we’ll also hear from Fedex (FDX), Oracle (ORCL), and Micron Technology (MU). FedEx will be lapping its worst quarter of numbers since the ’08 Recession, so the comparison’s get easier in calendar 2020.

It’s been a weird period for the “forward earnings estimate” the last 14 months. Year-over-year growth rates have been headed gradually down for that period.

Let’s wait and see if November 1 ’19 was the low point.

Take all of this with substantial skepticism, and evaluate the information in light of your own portfolio.

December 15th and the tariff deadline looms large after a blowout jobs report.

Thanks for reading.

 

 

 

 

 

2 Responses to “SP 500 Weekly Earnings Update: Forward Estimate Growth Rate Showing Signs of a Bottom”

  1. Ryan

    This is great analysis! I’ve long followed the weekly factset report so the additional color is helpful

    Reply

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