Expected SP 500 Q2 ’18 Sector Revenue Growth

Here is what the Street is expecting – by sector – for Q2 ’18 revenue growth:

  • Energy: +19.9%, vs +17.8% as of April 15, 2018
  • Basic Mat: +13.2%, +11.3% as of April 15, 2018
  • Technology: +12.4%, vs +10.9% as of April 15, 2018
  • Real Estate: +10.4%, vs. +6.5% as of April 15, 2018
  • Cons Discretionary: +8.1%, vs +7.4% as of April 15, 2018
  • Industrial’s: +7.9%, vs +7.1%
  • Health Care: +5.8%, vs. +6.3%
  • Cons Staples: +4.8%, vs. +4.2%
  • Financials: +4.5%, vs. +4.1%
  • Telco: +3.2%, vs +3.2%
  • Utilities: +0%, vs +0.9% as of April 15, 2018
  • SP 500: +8.1%, ex-Energy +7%

These snapshots of SP 500 data courtesy of Thomson Reuters IBES, don’t tell us as much as the trends in the above numbers, hence the expected Q2 ’18 revenue growth by sector is shown as of April 15, 2018. The only two sectors to show an expected slowing in revenue growth the last 90 days are Health Care and Utilities.

Of course this is uncorrelated to performance since Ute’s and the basic defensive sectors have rallied since the “trade war” headlines started.

Even the Financial sector is looking for slightly faster revenue growth the last 90 days.

The other aspect to this that i wanted to point out to readers, is that “revenue” isn’t directly impacted by the corporate income tax rate reduction (Tax Cuts & Jobs ACt) hence in my opinion it gives – perhaps – a better read on how much growth is from a stronger economy and how much “earnings” growth is tax-rate related.

Thomson Reuters IBES data (by the numbers):

  • Fwd 4-qtr est: $168.23 vs last week’s $164.16. (This blog talked about the pending jump in the estimate last weekend as the data “rolls” into a forward quarter.)
  • P.E ratio: 16.4x
  • PEG ratio: 0.79x
  • SP 500 earnings yield: 6.10% vs last week’s 5.99%
  • Year-over-year growth of forward estimate: +20.85% vs 21.84% as of last week.

Most blog readers won’t notice the mathematical anomaly, where the SP 500 rose 1.6% last week, but because the forward estimate roll jumped more than that, the SP 500 “earnings yield” jumped back over 6% (again). Historically, an SP 500 earnings yield over 6% has been a good time to own US stocks.

Q2 ’18 earnings should be solid. The big banks start reporting Friday, July 13, when Wells Fargo (WFC), JP Morgan (JPM), Citigroup (C) and PNC all report. Financial’s have traded poorly the last 5 weeks and you’d have to think expectations are low coming into Friday morning’s flood of bank releases. (Long JPM, XLF, KRE).

Thanks for reading.




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