SP 500 Forward 4-Quarter Estimate Compare’s Get Easier from Mid-October ’15

Regular readers know that Thomson Reuters “forward 4-quarter estimate” for the SP 500 is something that has been tracked on this site since the blog began in 2012.

The forward 4-quarter estimate as of October 17, 2014 was $129.34 and it has grown $10.40 or 9.5% since mid-October, 2013.

It has been uncomfortable to watch the negative y/y growth of the forward estimate, which started in May ’15, but the Energy and Basic Material’s sectors drag on the forward estimate also had to be considered when examining the data.

Here is the point of the blog post: from this week forward, the year-over-year growth of the forward estimate starts to lap easier “forward growth rate” comparisons:

Here is the data:

  • 6/13/14: $122.96, y/y growth = 8.51%
  • 7/18/14: $127.07, y/y growth = 8.57%
  • 8/15/14: $126.58: y/y growth = 9.40%
  • 9/19/14: $125.79 y/y growth = 8.56%
  • 10/17/14: $129.34, y/y growth = 9.49%
  • 11/17/14: $126.64, y/y growth = 7.54%
  • 12/19/14: $123.48 y/y growth = 5.71%
  • 1/16/15: $124.91, y/y growth = 4.77%
  • 2/13/15: $120.83, y/y growth = 1.35%
  • 3/13/15: $119.78, y/y growth = 0.82%
  • 4/17/15: $123.49, y/y growth = 0.62%
  • 5/15/15: $122.23, y/y growth = -0.51%

The forward 4-quarter estimate for the SP 500 has been negative ever since mid-May ’15. No question the decline in crude oil was starting to be perceived as something other than temporary, and the US dollar was starting a 22% ramp versus the euro.

While readers might consider this ultimate data navel-gazing, I think the “forward 4-quarter estimate” has some analytical importance. It is a weekly metric that – for better or worse – gives readers the best look at what the 1-year forward SP 500 EPS earnings looks like, and it’s updated every week.

Near the depths of the selloff in late August ’15, this blog post was written about the Energy sector and the International’s beginning to lap easier comparisons in Q4 ’15.

Bespoke had an interesting line in their weekly Bespoke Report published Friday night, 10/16/15: “Since the rally began on September 29th, the bounce higher has been led by stocks that prior to this point in the year had been struggling significantly….Over the last couple of weeks, though, we’ve seen the international stocks outperform domestics significantly.”

Per Bespoke, SP 500 stocks that generate more than 50% of their revenue outside the US, are up an average 9.38% since 9/29. Conversely, stocks that generate all their revenue from within the US are up an average 5.63%.

Analysis / conclusion: The sector rotation happening within the SP 500 could be more involved than many think. For me Apple. and biotech still hold the key to the market leadership.  I’m more confident that Apple can re-take its 200-day moving average, than biotech, so if biotech reports solid EPS and revenue growth and the sector continues to languish, the bid in Emerging Markets, and Non-US large-cap stocks within the SP 500 might have some traction. (Long AAPL, missed the biotech bull market.)

The expectation too is that sometime in the next 6 – 12 weeks, the SP 500’s “forward 4-quarter” estimate starts to turn positive again.




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