SP 500 Earnings: SP 500 Ex-Energy, Both EPS and Revenue History Show Stability and Consistency

In this weekend’s SP 500 Earnings Update, readers were told I’d get the history of the SP 500 from Thomson Reuters on SP 500 earnings growth “ex-Energy” and David Aurelio from Thomson Reuters was kind enough to provide the attached spreadsheet yesterday:

FC – SP500exEnergy11215

The first set of columns is the SP 500 year-over-year total earnings growth, with the Energy sector in the middle column and then the “SP 500 ex-Energy”  y/y earnings growth in the third column.

The second set of columns is the same information for SP 500 revenue growth.

A couple of trends were somewhat surprising looking at the data:

1.) In looking at quarter’s where Energy sector earnings growth was positive, the SP 500 ex-Energy y/y earnings growth still averaged mid-single-digits.

2.) From mid-2011, through Q3 ’15, excluding distortions from 2009 and then the 2010 compare’s, “average” SP 500 earnings growth ex-Energy is 8.6%.

3.) If you look at the data from mid-2011, the last 20% SP 500 correction, SP 500 earnings growth was actually pretty robust, as was the Energy sector during that year.

4.) Revenue growth has been remarkably consistent as well, but gradually slowing from mid to low single-digits.

5.) Q3 ’15 is the 4th consecutive quarter of slowing earnings growth, but still pretty decent at 6.5%. What kills me is how many pundits were noting that SP 500 earnings growth, ex-Energy, was better-than-10% from Q3 ’14 to Q1 ’15 ? Not too many – at all.

6.) Revenue growth ex-Energy has slowed for 4 consecutive quarters, but Q3 ’15, assuming that when retailers report during November ’15, do not drag the numbers lower, could see the first acceleration in y/y revenue growth since mid-2014. (Wal-Mart could have a big influence on Q3 ’15 revenue given their $450 billion full-year revenue estimate for calendar 2015, which will likely disappoint. long WMT)

Conclusion: despite the sturm-and-drang of mainstream financial media, SP 500 earnings and revenue have been growing with some consistency and stability post-2009. There has been some slight slowing of late in both core revenue and EPS, but nothing to really worry about in my opinion. Remember, Technology and Financials are 35% of the SP 500 by market cap: it is hard to believe those two sectors en masse, suffer through the kind of bear markets we saw in 2001 – 2002 and then 2008.

In terms of SP 500 earnings, 2008 and 2009 distorted the data greatly, so investors and data geeks now see a “steady-state” world of stable and consistent earnings growth.

In 2013, the SP 500 returned 32% for the calendar year, but SP 500 earnings growth was probably close to 10%. That is pretty powerful “P.E expansion”.

2016 could see something similar, maybe not to the same degree, but I am telling clients to expect a better year for 2016 in terms of both SP 500 returns, and earnings growth.

After all, 2016 is a Presidential election year.

(Many thanks to David Aurelio and Greg Harrison of Thomson Reuters for the data.)

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