Previewing the October 1 Bump in the SP 500 EPS Forward Estimate

The forward 4-quarter estimate is the key metric for this blog’s work since it’s the Street’s best estimate of forward EPS for the SP 500, and that means the forward PE can be calculated, and the “expected” growth rate as well.

Currently the Forward 4-quarter estimate for the SP 500 is $171.14, and that is the sum of the quarterly estimates for Q3 ’19 – Q2 ’20.

When the quarterly roll takes place on October 1, ’19, the new forward 4-quarter estimate will thus be Q4 ’19 – Q3 ’20, and that current estimated value is $176.25.

On a calendar basis, which is probably easier for people to grasp:

  • 2020: $182.66 (est) y/y growth expected at 11%
  • 2019: $164.30 (est) y/y growth expected at 1%
  • 2018: $161.93 (actual) y/y growth of 23%

Summary / conclusion:  The forward 4-quarter growth rate for the forward estimate is now just 1.22%, that’s as low as 2016. Using the forward estimate versus the 4-quarter trailing estimate, the y/y growth has fallen to 4%, which seems low, but on the Friday of the last full week of March or March 29th, the y/y growth of the forward estimate vs the trailing 4-quarter estimate was 2.6%.

For what was a difficult slowdown in corporate earnings through the first 6 months of 2019, the fact is Q2 ’19 SP 500 earnings growth turned out to be inline with Q1 ’19’s growth rate of 3%.

Two consecutive quarters of 3% SP 500 earnings growth doesn’t sound like much. Q3 ’19 will have the toughest comparison with 2018. We’ll talk about that over the weekend.

A lot of folks are skeptical of the 11% growth rate for SP 500 earnings next year. I do think a lot depends on the tariff outcome, but don’t discount it too much. That topic will be covered over the weekend as well.

Thanks for reading.


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