It is hard to forget the winter of 2014, at least in the Midwest. Boston is getting in 2015, in January and February what Chicago and the Midwest was hammered with last year.
So last winter 2014, after the 32.5% run in the SP 500 for calendar 2013, we had the following issues arise:
1.) Ukraine raised it’s very ugly head and Putin’s aggressive behavior become a serious problem.
2.) Venezuela devalued their currency amidst an economy in tatters which threw a wrench into the Consumer Staples and auto names earnings estimates.
3.) The winter weather in the Midwest and Northeast played havoc with retailers.
Here is what the full-year 2014 earnings growth rates looked like (by sector) according to Thomson Reuters as of 2/28/14, and the change from January 1 ’14:
- Consumer Disc: +10.7%, +13.5%
- Consumer Staples: +7%, +10.1%
- Energy: +9.1%, +12.9%
- Financials: +10.2%, +10.9%
- Health Care: +8%, +8.2%
- Industrials: +7.8%, +9.4%
- Basic Mat: +10%, +17%
- Technology: +8.7%, +10.6%
- Telco: +16.8%, +13.5%
- Ute’s: +2.1%, +2.9%
- SP 500: +8.9%, +10.8%
The bottoms-up estimate for the Sp 500 EPS for full-year 2014, on 2/28/14 was $119.05.
With all but 100 of the SP 500 having reported q4 ’14 earnings results, here are the pretty-much final earnings growth rates for 2014 by sector (per Thomson):
- Consumer Disc: +8.8%
- Consumer Sples: +4.3%
- Energy: +0.8% (still positive for ’14)
- Financials: +1.1% (more write-downs and litigation expenses)
- Health Care: +17.1%
- Industrials: +10.5%
- Basic Mat: +8.9%
- Technology: +13.7%
- Telco: +11.8%
- Ute’s: +9.4%
- SP 500: +8.1%
Here is what the full-year 2015 earnings growth rates look like today (by sector) according to Thomson Reuters as of 2/27/15, and the expected growth rate on January 1 ’15:
- Consumer Disc: +11.6%, +16.9%
- Consumer Staples: +2.3%, +6.6%
- Energy: -54.5%, -23.3%
- Financials: +16.8%, +17.8%
- Health Care: +7.6%, +10.5%
- Industrials: +6.3%, +9.7%
- Basic Mat: +4.4%, +14.7%
- Technology: +7.1%, +11.3%
- Telco: +5.4%, +4.9%
- Ute’s: +0%, +2.5%
- SP 500: +1.7%, +8.1%
If, as we have been writing about ad nauseum, if we assume the Energy sector is a 5.4% drag on the SP 500, then adding that 5.4% back to the index, full-year earnings growth today, is +7.1% ex Energy and although the rate of growth is slower this year than last for the SP 500, the rate of erosion is slower.
As our article from late last week detailed here, because of Energy’s weight in the SP 500 (less than 10% market cap). the decline in earnings within the sector is having far greater impact on earnings, than the market.
I’m trying to look at Thomson Reuters data to shoot holes in my thesis, that there really isn’t that much wrong with SP 500 earnings, outside of Energy.
There continues to be a litany of guests on CNBC and in the financial media yammering about “bad earnings” both guidance, and forecasts.
Here is an article from Schwab’s Liz Ann Sonders today. Trinity custodies client assets at Schwab, and I think highly of Liz Ann’s market prognostications. I just think piling on the “earnings are bad” platform misses the mark.
I dont really think SP 500 earnings will be that bad this year, and that is a contrarian opinion.