SP 500 Earnings: How have the 2020 Sector Estimates Changed with 2020 Guidance ?

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Source: “This Week in Earnings”, IBES by Refinitiv

To cut right to the chase, the overall “estimated” SP 500 earnings growth for 2020 fell about 1/2 of 1% in January, 2020, which, if we annualize, puts the expected 10% SP 500 EPS growth rate in 2020 of 10% closer to 4% – 5% for the calendar year.

The highlighted boxes show upward revisions to expected growth within the Financials and Technology sectors, which comprise 24.4% and 12.6% (37% total) of the SP 500’s market cap.

Just owning the three sectors of Tech, Health Care and Financials, gets you to a 50% SP 500 market-cap weight.

SP 500 earnings data (by the numbers):

Forward data:

  • Fwd 4-qtr est: $176.76 vs  last week’s $176.67
  • PE ratio: 18.2x
  • PEG ratio: 4.09x
  • SP 500 earnings yield: 5.48% vs last week’s 5.36% so the SP 500 earnings yield is correcting somewhat
  • Y/y growth of fwd est: 4.46% vs last week’s 3.92%

Having probably thoroughly confused readers, the last bullet point is the “fwd 4-qtr est” today versus the same estimate 52 weeks prior. It tells readers the “rate of change” of the forward estimate today which in this case is very much moving in the right direction. Here is the occasional spreadsheet shot we have been showing readers to shows how the “forward estimate” growth rate is growing once again vs 52 weeks ago.

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Its the bottom line or the “1-year chg %” and note from November 1, 2019 forward what it continues to tell readers.

The issue is that it fell or was steadily revised lower for 2019, which is a year that saw the SP 500 rise 31.8%.

Could 2019’s robust equity returns have been a function of an easier Fed ?

If rates are on hold for the rest of 2020 or at least until the Presidential election, at the very least we can see some y/y growth returning to forward earnings.

Note how the forward estimate (first bullet point) increased sequentially again. That’s a good sign.

Summary / Conclusion:  In two weeks Q4 ’19 earnings are unofficially over with Walmart’s report, and if we look at 2020 by quarter, the growth in SP 500 earnings is really expected to come in Q3 and Q4 of 2020. Q1 and Q2 of 2020 are seeing their expected SP 500 EPS growth rates getting pared considerably, while the back end of 2020 is holding up.

To follow up with readers on this blog post of a few weeks ago, the expected Energy sector growth rates of 30% for Q3 and Q4 ’20 are still intact at 30% as of this weekend’s This Week in Earnings, BUT, the data is as of Thursday night, January 30th, 2020 and Chevron and Exxon both reported their Q4 ’19 earnings Friday morning, January 31, and the stocks were down 3.8% and 4% on Friday, January 31.

Crude oil was down 15% in January, 20. Let’s see of those “back half” of 2020 expected 30% growth rates hold up in the next week or two.

Three big problems dodged for clients over the last few years have been Energy, Retail and Basic Material stocks.

Keeping it short today since there was a client breakfast this morning and a client meeting and dinner is scheduled for tonight.

If the Coronavirus issue shows up in SP 500 earnings, we’ll hear about it on the Q1 ’20 conference calls in April.

Thanks for reading…

My personal email is brianglm@trinityasset.com if you wish to ask a question or make a comment.



2 Responses to “SP 500 Earnings: How have the 2020 Sector Estimates Changed with 2020 Guidance ?”

  1. John Ellett

    I really enjoy your blog!

    If you haven’t already seen it, I thought you might be interested in the McClellan Financial Publication – Chart in Focus: How are Stocks Going Up While Earnings Go Down? – January 31, 2020 (https://www.mcoscillator.com/learning_center/weekly_chart/how_are_stocks_going_up_while_earnings_go_down/).

    • Brian Gilmartin

      Havent read the article yet John but Id guess it’s all about market cap.


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