Updating the “Industrial Recovery” Expectation for 2020

In this blog post of August 3rd, 2019, readers were given a heads up on the “upward” revisions occurring to the Industrial-related sectors for 2020.

Energy, Materials, Industrials and Communication Services were all sectors showing upward revisions to 2020 sector EPS growth estimates, which is typically more telling than downward revisions at this point.

Here is what the expected growth rates look like as of Friday, August 30, 2019:

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Since August 3rd, Energy has been revised higher, while Industrial’s and Basic Mat have been revised lower, but just by 1/10th of 1%.

Communications Services has been revised up almost a full percent since August 3rd too.

This blog post from last Thursday, August 29th talked about the “easier compares” 2020 will have versus 2019. Here is a better way of showing the year-over-year growth rates:

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SP 500 Earnings data (by the numbers): 

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Source: IBES by Refinitiv

Summary / Conclusion: To save time every week, the math will be cut-and-pasted for readers. What isn’t shown is the Y/Y growth rate of the forward estimate for SP 500 EPS, which is just 1.51% or if we look at “4-quarter trailing” vs. the “4-quarter forward” SP 500 estimate the growth rate is 4.43% versus the 4.49% of last week.

Some companies will give Street analysts and investors some idea of what the coming year will/might look like on October / November earnings calls, but this year undoubtedly the tariff question might results in some “constraint” on the first look at 2020 estimates.

Why would management venture out with an opinion on 2020 yet, if it all changes with a tweet ?

The point of today’s blog post is that the “expected” Industrial recovery has held up the last 4 weeks, with little in the way of downward revisions.

That would be a major surprise if it happened AND from this we might conclude that maybe there will be a trade / tariff agreement in the next few months.

There is more work to be done on this.

More to come this weekend on other topics.

Thanks for reading.




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