SP 500 Earnings Metrics: Silverblatt’s Earnings Work, the Fed Model, and today’s SP 500 Rally

After forgetting to put the weekly earnings metrics into the Weekly Update on Saturday, here are the weekly metrics and some additional thoughts:

Forward 4-quarter estimate: $119.78, down slightly from the prior week’s $119.87

P.E ratio: 17(x)

PEG ratio: 20.8(x)

Earnings Yield: 5.83%

Year-over-year growth rate of forward estimate: +0.82%, the lowest rate of growth since August 3rd, 2012, when the growth rate bottomed at 1.03%.

One of the goals I have for this blog is to become an “earnings data aggregator”, where I mix and blend various earnings data sources for readers, and provide perspective on the data and highlight aspects of various services and what they do well, and where – in my opinion – they add value. Factset puts out that forward revenue data, which I think is valuable to track, which Thomson does not publish.

Attached is Standard & Poor’s, Howard Silverblatt’s weekly earnings work: SP500_EPS_DIV_ta2.xls (silverblatt). This is a great blog: on the first page, i.e. “estimates & PE’s” note the PEG of the Energy sector, which is distorting the PEG ratio listed above, as are the Utilities to a smaller extent. The only question i have is whether Howard’s “operating earnings contribution” in terms of the Energy sector is that 4% – 5% that Howard is using or the 10% that I have been guesstimating for 2015 SP 500 growth rates.

As you look at Howard’s spreadsheet, check the SP 500 dividend yield: the SP 500 dividend yield is STILL very close to the 10-year Treasury yield, even after tonight’s close (the SP 500 rose 27.79 today, to close at 2,081.)

The Fed Model, which tracks the SP 500 Earnings Yield (see above) versus the 10-year Treasury still leaves stocks as a screaming buy versus the 10-year Treasury, given the 5.83% versus 2.10% spread. What the Fed Model is telling us, whether you believe it or not, is that interest rates could rise substantially, and not put too much of a dent in the SP 500 from a valuation perspective. In 1997, when Greenspan first referenced the model in his speech, the 10-year Treasury was yielding about what the earnings yield is on the SP 500 today (5.7%, 5.8%) and the SP 500 earnings yield was near 2%, about where the 10-year Treasury is trading today. (Hmmm…)

Today’s SP 500 rally took the key benchmark back over the 50-day moving average. We get Oracle’s (ORCL) earnings Tuesday night, Fed-Ex Wednesday morning, Lennar (LEN), Tiffany (TIF) and Nike (NKE) later in the week.

The SP 500 rallied today even though crude oil fell – that hasn’t been the correlation the last 6 months.


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