SP 500 “Ex-Energy” Earnings and Revenue Growth

Thanks to Thomson’s David Aurelio (and Greg Harrison) for updating this data today.

3 months ago, we posted to this blog SP 500 earnings and revenue estimates “Ex-Energy”.

Today, Thomson provided the updated numbers here: FC – SP500exEnergy5516

The bottom line is that while Q4 ’16 came in a little better than what the numbers were on 2/5/16, Q1 ’16’s numbers are looking a little worse.

Coming into this week, just 16 of the 38 companies in the SP 500 denoted as “Energy” companies had reported Q1 ’16 earnings.

I was looking at the Exxon forward EPS and revenue estimates last night and they continue to be revised higher since their 4/29/16 report. Chevron however saw negative revisions to forward estimates, thus the two giants could be negating each other in terms of the sector effect.

Analysis / conclusion: Both the March ’16 blog posts (here and here) thought that Q1 ’16 could be the bottom for SP 500 earnings declines and I continue to think that is the case. Unfortunately, we will only know with 100% certainty in hindsight, thanks to SP 500 earnings being a lagging indicator, which is why I put such a premium on the 4-quarter forward EPS number and its y/y growth rate and the forward quarterly estimates.

The Energy sector is bottoming, both in terms of revenue and earnings growth. Earnings and revenue growth may not accelerate like they have in the past, but I do think that Q3 and Q4 ’16 will show better earnings growth.

For the SP 500 “ex-Energy”, I also think the bottom is in, but with a little less confidence since Technology and Financials are the two biggest sector weights. Technology, ex-Apple, (per Thomson was) +4% y/y earnings growth as of last week while including Apple, Tech sector earnings fell roughly 8.5% y/y. The Financial sector is still a drag on the SP 500 earnings growth for another quarter or two.

Bespoke noted again today that the SP 500 “earnings guidance spread” has turned positive, the first time since July ’14 ! Bespoke_Chart_of_the_Day_–_Guidance_Spread_Turns_Positive


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