SP 500 Weekly Earnings Update: Q4 ’16 SP 500 Earnings “Less Negative”

Thomson Reuters (by the numbers):

  • Forward 4-quarter estimate: $128.61 vs last week’s $128.56 and another sequential revision higher, which is unusual
  • P.E ratio: 17(x)
  • PEG ratio: 4(x)
  • SP 500 earnings yield: 5.87% up from last week’s 5.81%
  • Year-over-year growth of the forward estimate: 4.15%, vs last week’s 4.03% and nearing the high’s from January ’15

The stat of the week is from Factset, as John Butters notes that the typical downward revisions to the 4th quarter ’16 growth rate that we typically see at this point in the 3rd quarter is “less negative” than historical data suggests.

I’ve written about this changing pattern in the past, but here is the Factset data:

  • Q4 ’16 actual drop: -2%
  • 4-quarter average: -3.8%
  • 20 quarter average: -3.4%
  • 40 quarter average:-3.9%

The “forward 4-quarter” estimate has risen for three weeks in row sequentially, which is also a subtle but important sign of underlying strength in forward earnings.

Energy will be a positive contributor to SP 500 earnings in Q4 ’16, for the first time in almost 8 quarters.

On Friday, December 2nd, the Technology weakness was written about┬áhere. The disparity between the “Growth” and “Value” style boxes is expanding rapidly. I’ll have more on the tech sector’s weakness and Growth vs Value this coming week.

Q4 ’16 earnings will become less relevant into early 2017, particularly after the inauguration of President-elect Trump as we see and hear what Congress has in store in terms of tax law changes. No question the legislative agenda will be very “pro-business”.

The SP 500 earnings yield continues to remain elevated and the y/y growth in the forward estimate continues to grow, both bode well for forward stock returns.

Thanks for reading.



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