What is SP 500’s “Forward Earnings Curve” Telling Us ?


Maybe a better title for today’s SP 500 earnings look, is “What impact did Apple’s fiscal Q3 ’17 quarter have on forward estimates” but let’s put that aside for a second.

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Each week on this blog the “forward 4-quarter” EPS estimate for the SP 500 is reported, as provided by Thomson Reuters “This Week in Earnings”. Thomson does NOT give the year-over-year growth of the forward estimate nor does it provide some of the other metrics this blog does (i.e. SP 500 earnings yield, PEG ratio, etc.) but Thomson does provide a listing of bottom up EPS estimates for forward quarters, from which we can expand the “forward 4-quarter” estimate to a forward SP 500 earnings curve so to speak, much like the forward rates on the Treasury yield curve, etc.

This past week and for the 3rd quarter of ’17, the “forward 4-quarter” estimate is comprised of Q3 ’17, through Q2 ’18 estimates.┬áThe forward quarters then are Q4 ’17 through Q3 ’18 and then Q1 ’18 – Q4 18.

2019 bottom up estimates haven’t been provided by Thomson Reuters I/B/E/S.

So far the “forward earnings curve” is consistent with the rest of the data discussed the last few months:

1.) Little downward pressure on forward growth rates or dollar estimates

2.) The increase in forward estimates for the week of 8/4/17, could be attributable to Apple. Note the increase in the forward estimates for the week of August 4th – Apple was the big report that week.

Analysis / conclusion: This data set will expand significantly over the coming months and quarters, but it will be reported to readers quarterly since it is another useful metric in the earnings data set. Basically the forward earnings curve is the Forward 4-quarter EPS estimate” 2, 3, and 4 quarters out from where we normally look, and it’s a rolling 4-quarter metric. Probably too much detail for now and not enough history, but know it is being tracked.

Thanks for reading.


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