SP 500 Earnings Yield Jumps to 6.37%

Even with the late-day surge on Friday, the SP 500 ended the day with an SP 500 “earnings yield” of 6.37%, not nearly as attractive though as the yield from Thursday night, March 12th, which (using the forward 4-quarter estimate of $172.71) printed 6.97%, just 3/100th’s away from the December, 2018 high earnings yield of 7%.

Maybe Thursday night, March 12th was the bottom.

SP 500 Earnings data: (Source for forward estimate is IBES by Refinitiv):

  • Fwd 4-qtr est: $172.71 vs last week’s $174.30
  • rate of change: +2.94% vs last week’s 3.86%
  • PE ratio: 15.7x vs last week’s 17x
  • SP 500 earnings yield: 6.37% vs 5.86% from last week, a pretty steep jump

 

Summary / conclusion: Reading some of the headlines from the conference call on Oracle’s fiscal Q3 ’20 which ended Feb ’20 last night, the database-cum-cloud giant guided to slighlt better EPS growth for their traditionally strongest fiscal Q4 ended May ’20. Oracle is doing a little better transitioning from on-premise organic licenses to cloud applications, but the decline in that legacy on premise business is still a drag on the entire business. The stock was up 8% on just over 2x average volume. Our earnings preview on Oracle was here and there was one aspect to the headlines that caught my eye. It requires a longer article.

At this point I thing Q1 ’20 SP 500 earnings are a real crap-shoot: even thought the consumer is strong and the February ’20 employment report was very strong, how do you / we trust anything in terms evaluating changes in consumption patterns and business work practices. However have things changed that much ?

Q1 ’20 SP 500 earnings growth has been revised down to expectations of 1% and for Q2 ’20  +3.5% growth. Those will likely go lower too.

The most interesting companies reporting this coming week could be Accenture (ACN) and FedEx (FDX). Accenture will give a good read into B2B, and FedEx will probably talk about China and the state of freight in Europe and trans-Pacific geographies.

Nike reports too.

Forward expectations for earnings will likely be as volatile as the SP 500, with the probability of a bias to the downside.

We start getting Q1 ’20 earnings in 4 weeks, with commentary.

Thanks for reading.

(Remember this is just one opinion. Evaluate all the info provided in conjunction with your own financial profile. Opinions are often wrong and usually not updated. Readers should take all investment and market opinions with a substantial degree of skepticism since market conditions can change rapidly.)

4 Responses to “SP 500 Earnings Yield Jumps to 6.37%”

  1. JM

    Fwd earnings yield is NEGATIVE: see 2008 analogy.

    Reply
    • Brian Gilmartin

      doubtful if an expected $170 in expected 2020 EPS went to $0. That $170 will get reduced for sure. Can you tell me what the actual SP 500 EPS was for 2008 ? Probably not so I’ll give you the answer: it was $65.

      Earnings wont go to zero.

      Reply
  2. srini

    https://www.yardenibook.com/pub/ptmcctchap14valuation.pdf

    Yardeni publishes ERP which takes into account Forward earnings yield – real interest rate (10 year – CPI). I think that is good measure since it incorporates interest rate level

    Reply

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