{"id":10117,"date":"2020-04-17T22:15:50","date_gmt":"2020-04-17T22:15:50","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=10117"},"modified":"2020-04-17T22:15:50","modified_gmt":"2020-04-17T22:15:50","slug":"sp-500-earnings-update-rate-of-deceleration-in-forward-sp-500-earnings-needs-to-slow","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=10117","title":{"rendered":"SP 500 Earnings Update: Rate of Deceleration in Forward SP 500 Earnings Needs to Slow"},"content":{"rendered":"

(One reader has complained that the banner for www.fundamentalis.com is obstructing most of the article each week. If other readers are having this issue, please let me know. Thank you.)<\/p>\n

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This whole process that the sell-side goes through each week to arrive at bottom-up and top-down estimates for the SP 500 and then the expected growth rates by sector has been blown to bits by the Covid-19 scare and the shelter-in-place.<\/p>\n

That being said, like driving a car through brutal “white-out” snowstorm, where you’ve slowed to 10 MPH on an expressway, it might be verry difficult to see in front of you, but it’s still the best tool you have.<\/p>\n

Here is what caught my eye this week:<\/p>\n

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click to open \/ enlarge<\/figcaption><\/figure>\n

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The calendar 2020 EPS estimate for the SP 500 has fallen from $177 – $178 around late December ’19, early January ’20 to $141 today, and it’s still probably going lower since crude oil continues to drop.<\/p>\n

In terms of the quarterly progression in bottom-up estimates, it sure looks like Q2 ’20 will be the bottom for the quarterly SP 500 estimates as Q2 ’20 is sitting at $30 per share.<\/p>\n

What’s more interesting for readers:<\/strong><\/em><\/p>\n

The forward 4-quarter estimate of $145.70, which measures from Q2 ’20 to Q1 ’21 is now $4.70 higher than the calendar 2020 EPS estimate which tells me that by Q1 ’20, the SP 500 EPS will have returned to growth.<\/p>\n

What wouldn’t I want to see ?\u00a0<\/strong><\/em><\/p>\n

The 2019 final, actual, SP 500 EPS was $162.93.<\/p>\n

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click to open \/ enlarge<\/figcaption><\/figure>\n

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This spreadsheet of the calendar 2021 SP 500 estimate has fallen over $20 since late January ’20.<\/p>\n

I wouldn’t want to see this 2021 SP 500 estimate fall much below the low $160’s, which would mean 2 years of flat to negative growth for SP 500 earnings.<\/p>\n

SP 500 earnings peaked in 2006 at $88.18 per share and it wasn’t until 2011 that the SP 500 finally printed an annual EPS estimate above $88.18, printing $97.82.<\/p>\n

Here is a quick look at the metrics:<\/p>\n