{"id":11066,"date":"2020-12-12T09:39:20","date_gmt":"2020-12-12T15:39:20","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=11066"},"modified":"2020-12-12T09:39:20","modified_gmt":"2020-12-12T15:39:20","slug":"sp-500-earnings-update-still-higher-although-nearing-the-slow-period","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=11066","title":{"rendered":"SP 500 Earnings Update: Still Higher, Although Nearing the Slow Period"},"content":{"rendered":"<p>Fed-Ex (FDX) reports their fiscal 2nd quarter, 2021, Thursday afternoon, December 17th, 2020, after the closing bell.<\/p>\n<p>Since FDX is an industrial stock and has had a monster rally from near $125 when it last reported in June &#8217;20 to the $289 close tonight, December 11th, and is also expected to benefit from the vaccine distribution logistics, there is no doubt actual Q2 &#8217;21 earnings and more importantly guidance will be closely watched.<\/p>\n<p>A longer article will be forthcoming this week as a FedEx earnings preview.<\/p>\n<p><em><strong>SP 500 data:\u00a0<\/strong><\/em><\/p>\n<ul>\n<li>The forward 4-quarter estimate rose again this week to $160.66 versus last week&#8217;s $160.40.<\/li>\n<li>The PE ratio on the forward estimate fell to 22.8x, still salty given the expected &#8220;average&#8221; SP 500 EPS growth rate for calendar 2020 and 2021 is 4%.<\/li>\n<li>The SP 500 earnings yield using the forward estimate is 4.39% this week, versus 4.34% last week. This was the first sequential increase in the SP 500 earnings yield since the month of October, and probably due to the fact that the SP 500 fell 1% on the week. The Nasdaq Composite fell roughly 69 bp&#8217;s on the week, while the QQQ&#8217;s fell 1.2% the last five days.<\/li>\n<\/ul>\n<p><em><strong>SP 500 Forward Earnings Curve:\u00a0<\/strong><\/em><\/p>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/sp500fwdepscurve121120-2.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-11070\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/sp500fwdepscurve121120-2-300x116.png\" alt=\"\" width=\"300\" height=\"116\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/sp500fwdepscurve121120-2-300x116.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/sp500fwdepscurve121120-2-1024x395.png 1024w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/sp500fwdepscurve121120-2-150x58.png 150w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/sp500fwdepscurve121120-2-768x296.png 768w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/sp500fwdepscurve121120-2-1536x592.png 1536w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/sp500fwdepscurve121120-2-1600x617.png 1600w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/sp500fwdepscurve121120-2.png 1868w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>Click on the forward earnings analysis and you&#8217;ll see the sequential and 4-week rate of change are a little softer in terms of their percentage increases but the 12-week remains Ok.<\/p>\n<p>Starting next Friday, December 18th, through the first week of January &#8217;21, the revision activity will likely slow to a crawl. It happens every quarter, but with the seasonality around the holidays and the New Year, the sell-side analysts and revision activity gets particularly slow.<\/p>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/revisionsearlyOctdec1120.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-11071\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/revisionsearlyOctdec1120-300x68.png\" alt=\"\" width=\"300\" height=\"68\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/revisionsearlyOctdec1120-300x68.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/revisionsearlyOctdec1120-1024x231.png 1024w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/revisionsearlyOctdec1120-150x34.png 150w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/revisionsearlyOctdec1120-768x173.png 768w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/revisionsearlyOctdec1120.png 1141w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>This above link if opened will show week-to-week positive and negative revisions for the SP 500 from early Oct &#8217;20 through December 11 &#8217;20.<\/p>\n<p>Now lets look at the same period in 2019:<\/p>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/revisionsDec19throughfeb20.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-11072\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/revisionsDec19throughfeb20-300x70.png\" alt=\"\" width=\"300\" height=\"70\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/revisionsDec19throughfeb20-300x70.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/revisionsDec19throughfeb20-1024x240.png 1024w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/revisionsDec19throughfeb20-150x35.png 150w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/revisionsDec19throughfeb20-768x180.png 768w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/revisionsDec19throughfeb20.png 1078w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>Starting with early December &#8217;19, the first mention of the coronavirus was January 21, 2020. But note how the estimate revisions slowed materially in the last weeks of December and early Jan &#8217;20. With New Year&#8217;s Week &#8217;20, there were (only) a whopping 95 revisions for SP 500 companies, and the week before that was pretty low too.<\/p>\n<p>(Data compliments of IBES data by Refinitiv. Refinitiv shows a rolling 4-week period within &#8220;This Week in Earnings&#8221; every week, but this blog tracks the data on a spreadsheet with SP 500 weekly return data. The weekly revision data goes back to October, 2009. Yes, I&#8217;m a data geek.)<\/p>\n<p><em><strong>Q3 &#8217;20 &#8211; Q2 &#8217;21 expected SP 500 EPS and revenue growth<\/strong><\/em><\/p>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/q320q221SP500expEPSrevgro121120.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-11075\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/q320q221SP500expEPSrevgro121120-275x300.png\" alt=\"\" width=\"275\" height=\"300\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/q320q221SP500expEPSrevgro121120-275x300.png 275w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/q320q221SP500expEPSrevgro121120-137x150.png 137w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2020\/12\/q320q221SP500expEPSrevgro121120.png 695w\" sizes=\"auto, (max-width: 275px) 100vw, 275px\" \/><\/a><\/p>\n<p>Look at the sharp recovery in Q3 &#8217;20 EPS and revenue growth once the reporting started.<\/p>\n<p>Note how Q4 &#8217;20 has lagged in terms of the same revisions.<\/p>\n<p>The conclusion is that either analysts remain cowed and tentative about Q4 &#8217;20 numbers, perhaps due to the lack of stimulus, or Q4 &#8217;20 is going to see similar upward revisions starting in early January &#8217;21 once companies start reporting.<\/p>\n<p>My own opinion is Q4 &#8217;20 EPS estimates are still too low. The analyst pattern has been clear all during Covid i.e. missing a big upside number is not nearly as fatal to an analyst&#8217;s career as missing a big downside surprise.<\/p>\n<p><em><strong>Summary \/ conclusion: <\/strong><\/em>Bottom-up quarterly estimates for calendar 2022 don&#8217;t start being published by Refinitiv until April 1, 2021. The only reason that is brought up is that for calendar 2022, the estimate started out at $200 on April 1, 2020 didn&#8217;t get revised lower too much from March through July, hitting a low of $186 and change, and it&#8217;s back to $197 already.<\/p>\n<p>Ironically, the same is for 2021: I was worried the estimate would fall below the 2019 print of $162.93 and in fact it never did bottoming at $163.31 and now back above $169. (What&#8217;s more interesting is that the $163.31 low 2021 EPS estimate didn&#8217;t bottom until mid-August &#8217;20, or 5 months after the SP 500 bottomed. )<\/p>\n<p>FedEx and Micron will report over the next two weeks and those companies &#8211; given their operating leverage &#8211; have volatile EPS. That being said the rest of 2020 the first week of January &#8217;21 will likely see minimal revision activity. That could change with the Georgia Senate runoff races since &#8211; if the Republicans lose both Senate seats &#8211; tax hikes will quickly be back on the table in 2021.<\/p>\n<p>Take everything here with skepticism. Invest in a way that is comfortable for you. The data and the markets change daily and weekly and often sharply.<\/p>\n<p>Thanks for reading.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Fed-Ex (FDX) reports their fiscal 2nd quarter, 2021, Thursday afternoon, December 17th, 2020, after the closing bell. Since FDX is&hellip;<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[91],"tags":[],"class_list":["post-11066","post","type-post","status-publish","format-standard","hentry","category-weekly-earnings-update"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/11066","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11066"}],"version-history":[{"count":6,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/11066\/revisions"}],"predecessor-version":[{"id":11078,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/11066\/revisions\/11078"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11066"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11066"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11066"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}