October ’15’s SP 500 Earnings Results: Ex-Energy, SP 500 Earnings Growth 5% – 6% for Q3 ’15

Using Factset’s Weekly Earnings Insight, Ex-Energy, SP 500 earnings are +5% – 6% for Q3 ’15, probably slightly slower than the first and 2nd quarter’s of 2015.

Ex-Energy, SP 500 revenue has grown +2.2% y/y, with retail or Consumer Discretionary set to report in November ’15. Financials, Technology and Energy have pretty much all reported Q3 ’15 earnings.

A couple statistics jumped out during the typical Saturday mornings SP 500 earnings reads:

  • Per Factset, the revision for Q4 ’15’s bottom-up estimate is -2.4%, lower than 1-year average but higher than the 5 & 10-year averages. In English, what that means is looking ahead to Q4 ’15, the bottom up estimate has been revised 2.4% lower since October 1 ’15, and looks to be inline with the longer-term averages, i.e. investors are seeing the normal rate of negative revisions for the next forward quarter (or Q4 ’15) as it stands today.
  • Also per Factset, Health Care has the highest number of companies beating EPS consensus at 86%, as well the highest percentage of companies beating revenue consensus at 69%.
  • Per Thomson Reuters, SP 500 earnings are expected to grow at 6.3% in Q3 ’15, which Thomson calls “the lowest Ex-Energy growth rate in over two years”. ( Readers need to see the data on this – give me a few days.)
  • Per Bespoke, in terms of the market action since the September ’15 lows, the biggest surprise I see is that “international companies” or companies with greater than 50% of their revenue from outside the US, “have outperformed domestic names significantly” during this rally.
  • Bullish sentiment has suddenly spiked higher, and it has remained stubbornly below average for a while. Part of the spike could be due to the plethora of articles about the SP 500’s “seasonal” returns beginning November 1 of each year.

Analysis / conclusion: Core SP 500 earnings growth Ex-Energy is still growing at a mid-single-digit pace, but slowing somewhat. What is the catalyst that will accelerate SP 500 earnings growth ? Hard to say. I think it will be SP 500 corporate boards and leadership growing more positive about the future. There is no question that SP 500 earnings growth is locked in this “slow, stable, mid to high-single-digit, year-over-year growth” range, quarter-in, quarter out, which despite the headlines and negative earnings pessimism, continues unabated.

One statistic readers might like: updating my Apple (AAPL) spreadsheet with current EPS and revenue Street consensus after Apple’s fiscal Q4 ’15 earnings report, the “average” EPS and revenue growth rate over the next 3 years (fiscal ’16 – ’18) is 9% and 5% respectively. Expectations for Apple’s forward growth have been ratcheted WAY down, which is highly unusual for a leadership stock like that. AAPL may now be a “growth cyclical” similar to that of the tech giants of the late 1990’s.

Thomson Reuters data for SP 500 earnings (By the Numbers): 

  • Forward 4-quarter estimate for SP 500: $124.32
  • Forward estimate of P.E ratio: 16.7(x)
  • PEG ratio: still negative given y/y growth rate
  • SP 500 earnings yield: 5.98%, versus last week’s 5.99%
  • Forward estimate y/y growth rate: -2.09% vs last week’s -1.88%. The expectation is that this will turn positive in November ’15. Not yet though.

The PEG ratio using core SP 500 earnings growth is closer to 2.5(x).

Despite the bleating of mainstream media, SP 500 earnings are rolling along about as usual, but the year-over-year growth rate is trending slightly lower.

The SP 500 is now overbought. A 200 point down day for the Dow 30 would take a lot of fluff out of the market.


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