“And then they shelled the Pizza Hut”.
A friend from the neighborhood who went to West Point and spent five years in the Army with 6 months in Afghanistan at the Kandahar airfield is polite enough to answer questions about her time there and her experience in Afghanistan and one night when we were talking at the local restaurant, she told me how the firebases had become small American cities with so many of the amenities of home, which says a lot about the Armed Services trying to make the boots on the ground have some semblance of a normal life. Talking about the various restaurants on base, etc. she mentioned the above incident saying the Taliban liked to hit the base occasionally with surprise mortar attacks.
Well, I guess losing the Pizza Hut made many of the soldiers quite unhappy. She went on to say the Army soldiers “really like their pizza” and the Pizza Hut was rebuilt quite quickly. (No one was injured in the attack.)
I will ask her abut the latest military movie like “12 Strong” and such and she says she still doesn’t watch or read much military-related movies, shows or books. She says it’s still “a little too close for her”. She must have lost friends while on active duty at Kandahar.
Incredible woman, all 5’4 of her, and another silent, great American veteran.
Anyway, an attempt at some light humor as well as reflection on a slow Sunday in February.
Thomson Reuters I/B/E/S data (by the numbers):
- Fwd 4-qtr est: $158.07 vs. last week’s $157.78
- P.E ratio: 17.4x
- PEG ratio: 0.86x
- SP 500 earnings yield: 5.75%
- Year-over-year growth of the fwd est: +20.27% vs last week’s +20%.
Once again, this week, the Thomson Reuters data showed a sequential increase in the SP 500 “forward 4-quarter estimate” to $158.07 and a y/y growth rate of over 20% which continues to indicate that the positive story around SP 500 earnings continues unabated.
Per the Thomson Reuters “This Week in Earnings” report, 10 of the 11 SP 500 sectors expect to see an improvement in earnings from Q4 ’16.
Take a look at this blog post from February 3rd, 2018. This spreadsheet will be updated before the end of the quarter, looking at this week’s “2018” expected EPS growth, and comparing this week’s data , here are the strongest sectors expected for the year (and you can use this to guide your sector allocations on pullbacks):
- Energy: +70% EPS growth expected in 2018, up 73% from Jan 1’s expected 40% growth
- Financials: +28.5% EPS growth expected in 2018, up 63% from Jan 1’s 17.5%
- Health Care: +11.2% EPS growth expected in 2018, up 62% from Jan 1’s +6.9%
- Industrials: +19.2% EPS growth expected in 2018, up 98% from Jan 1’s 9.7%
- Telecom: +15.2% vs Jan 1’s +1.2% (so a lot)
The above reflects the percentage growth in the estimate since Jan 1 ’18 but also the absolute rate of growth expected. For example, Health Care’s estimate has risen 62% since Jan 1 ’18 but is still considered relatively “average” at 11.2% in terms of the sector’s year-over-year growth rate. Health Care usually averages high-single-digit, low double-digit earnings growth most quarters over the last 4 – 5 years.
What surprised me ?
- Industrial’s expected 2018 earnings growth has nearly doubled since Jan 1 ’18, which you’d think is a positive.
- Technology’s +17% expected earnings growth is up from 13% as of Jan 1 ’18. Not nearly the rate of change i thought, even with the big buybacks of Apple and Microsoft (long both). More a negative…
- Real estate is actually down, now expecting 5.2% earnings growth for 2018, versus 6% as of Jan 1 ’18. Sector has traded accordingly, no positions.
Howard Silverblatt is Standard & Poors SP 500 earnings expert and is quite good at what he does and toils in relative anonymity. Howard posted this table to Twitter recently. You can follow him on Twitter at @hsilverb.
It’s been a “large-cap” market since late 2016.
If the 10-year Treasury yield trades solidly above 3%, readers might start to see some market-cap and sector rotation.
Thanks for reading.