David Aurelio of Thomson Reuters is very helpful in getting good sector information on the Thomson Reuters IBES data on the 11 SP 500 sectors.
David has never failed to deliver when asked a question.
Recently this blog asked David about the coming advent of the new “Communications sector” within the SP 500 which will replace the Telecom sector as of September ’18.
Here is what the revenue and EPS growth rates look like:
Norm Conley of JA Glynn, (@JAG_Norm, @JAG_CAPM) a money manager down in St. Louis and a friend from back in the day when we both wrote Jim Cramer’s TheStreet, published this table in late June ’18:
Here is how the math will work:
Technology will lose 7 sectors to the new Communications sector
Consumer Discretionary will lose 12 companies to Communications
Telco will lose all 3 companies to the Communications sector and cease to exist as a sector within the SP 500
The Communications sector will thus have 22 companies and Telco will disappear, as it should have years ago.
To greatly oversimply it, using Norm’s table, social media, traditional media and Telco will comprise the new Communication sector.
Facebook and Google are the two big heavyweights moving from Tech to Communications.
Part II
Examining the top part of the Thomson Reuters IBES table, note the expected slowing of SP 500 earnings in 2019 (broken down by quarter).
That is the “reversion to the mean” that readers should expect.
However, just like the return on the SP 500 is trailing this year’s expected +20% SP 500 earnings growth, just because the growth rate in earnings is expected to slow in 2019, doesn’t mean that the SP 500 will have a similar return. We could see a nice year of P.E expansion next year, if the pattern holds.
There are a couple more metrics that I’d like to show about the Communcation sector but it will have to wait for another post.
Wanted to keep this short and sweet.
Thanks for reading…