SP 500 Weekly Earnings Update: SP 500 Earnings from a Few Different Angles

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Don’t know the person that tweeted this, but the quote is supposedly from Stanley Druckenmiller, a well known and successful hedge-fund manager.

No question there is some truth to this, as (I would think) liquidity creates opportunities for growth via lower interest rates, etc.

The big question in the mainstream financial media is the coronavirus impact. We’ve heard from Apple (AAPL), Procter & Gamble (PG) and Coca-Cola (KO) the last few weeks. Coca-Cola finished at an all-time high on Friday, February 21, 2020, after it broke out of a 20-year base in June, 2019. (Here is a Seeking Alpha link to a Coca-Cola article written for subscribers. KO is a perfect example of how technical’s very often precede fundamentals.)

The action in Coca-Cola (KO) and Procter & Gamble (PG, which is a stock that has ascended into the Top 10 S&P 500 weights by market cap, have taken the coronavirus impact in stride.

SP 500 Earnings (by the numbers):

  • Fwd 4-qtr est: $175.48 vs last week’s $175.75
  • Fwd est rate of change: Surprisingly rose last week to 4.28% vs the week prior’s 4.21%. The prior or recent 6-month high from Jan 31, ’20 is 4.46%. Again, this number represents the “rate-of-change” of the forward estimate versus 52-weeks prior.
  • PE ratio: 19x
  • SP 500 earnings yield: Jumped to 5.26% this week from the low of 5.20% the week prior.

It was surprising to see the “rate-of-change” tick higher in the forward 4-quarter estimate given the coronavirus news, but the numbers are what they are.

How have the SP 500 expected sector rates of growth changed for 2020 ? 

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For new viewers, what I look for is is slowing rates of decay in the weekly or monthly revisions OR outright positives revisions to forward growth rates. The Street is still spooked by China and what’s happening there.

Even with Apple’s preannouncement and lower revenue guide around the coronavirus, Tech is still looking strong for 2020.

Didn’t expect this graph: 

 

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Fresh from Bespoke’s Weekly Report on February 21, 2020, this graph of the Shanghai Composite notes that – seemingly – not even the Chinese are worried about Covid-19.

Presidential election odds: An interesting graph

 

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This page from Bespoke’s Weekly Report (if you aren’t reading Bespoke you should be. For a reasonable cost, it is some of the best Street research week-in and week-out).

Note the bottom of the graph: since this blogger has clients on both sides of the aisle, it never really pays to talk politics but the potentially Republican flip of the House in November, is seeing the odds increase. Remember, this can all change too.

Just stay on top of it – politics matter because economics matters.

Summary / conclusion: Looking at SP 500 earnings from a few different angles this week, with Walmart’s earnings report from last Tuesday unofficially ending the Q4 ’19 earnings season. SP 500 earnings for 2019 rose about 1%, the weakest rate of growth in years, and yet the SP 500 rose 31% on the calendar year. Stan Druckenmiller’s quote above caught my eye since the FOMC / Fed cut the fed funds rate in 2019.

The largest market-cap weights in the SP 500 and the Nasdaq 100 got cracked this week which was likely badly-needed anyway. During the worst of it on Friday, February 21, 2020, both Tesla and Coca-Cola managed to finish higher on the day.

There is no single theme to the earnings update this weekend. The impact of Covid-19 seems different for different stocks. The fact that Coke warned and yet closed very close to all-time-highs on a negative week is telling.

Take any opinion or comment as purely a personal perspective on the stock and bond markets. Conditions change rapidly within investing. This blog’s opinions are also not always updated either in a timely fashion or at all, although the comments on this blog tend to reflect what portfolio positions and portfolio perspectives used currently for clients as much as possible.

My personal email is brianglm@trinityasset.com if you have comments, criticism, arguments or want to start a fight. The only think i ask just have a reasonably-informed opinion rooted in something-other-than a mainstream financial media meme.

Thanks for reading.

 

 

2 Responses to “SP 500 Weekly Earnings Update: SP 500 Earnings from a Few Different Angles”

  1. Phil Stone

    Brian, Thoroughly enjoy your balanced. well researched approach to earnings and impact on valuations. Have attached a link concerning Johns Hopkin’s global tracking of COVID-19. While I am truly sorry for illness, suffering, and worse it seems the media has pumped the impact of this illness to levels not borne out by the numbers.
    https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6

    Reply

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