{"id":12306,"date":"2021-12-19T11:41:06","date_gmt":"2021-12-19T17:41:06","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=12306"},"modified":"2021-12-19T11:41:06","modified_gmt":"2021-12-19T17:41:06","slug":"sp-500-earnings-update-forward-eps-trends-look-fine-while-sentiment-is-horrid","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=12306","title":{"rendered":"SP 500 Earnings Update: Forward EPS Trends Look Fine, While Sentiment is Horrid"},"content":{"rendered":"<p>Last year at this time, expectations for full-year 2021 SP 500 EPS growth (by sector) looked like this: (All data sourced from IBES by Refinitiv):<\/p>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/Sp500sectorgrorateson123120121921-1.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-12309\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/Sp500sectorgrorateson123120121921-1-300x101.png\" alt=\"\" width=\"300\" height=\"101\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/Sp500sectorgrorateson123120121921-1-300x101.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/Sp500sectorgrorateson123120121921-1-150x50.png 150w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/Sp500sectorgrorateson123120121921-1.png 727w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a>Today, the same expected sector growth rates for 2022 look like this:<\/p>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500sectorgroratesfor22on121721.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-12310\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500sectorgroratesfor22on121721-300x106.png\" alt=\"\" width=\"300\" height=\"106\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500sectorgroratesfor22on121721-300x106.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500sectorgroratesfor22on121721-150x53.png 150w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500sectorgroratesfor22on121721.png 645w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>The point of all this is that one year ago, the &#8220;expected&#8221; sector growth rates were half of what reality turned to be since 2021, with another quarter left to report, look like this presently:<\/p>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/sp500sectorgrorates121721.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-12311\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/sp500sectorgrorates121721-300x68.png\" alt=\"\" width=\"300\" height=\"68\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/sp500sectorgrorates121721-300x68.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/sp500sectorgrorates121721-1024x231.png 1024w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/sp500sectorgrorates121721-150x34.png 150w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/sp500sectorgrorates121721-768x173.png 768w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/sp500sectorgrorates121721.png 1088w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>The 22% expected SP 500 growth rate (one year ago) for 2021 is now 49.6%.<\/p>\n<p>Does that mean the same doubling of SP 500 EPS will occur in 2022 ? Hardly, but the patterns shown here every week, still look positive.<\/p>\n<p>SP 500 metrics:<\/p>\n<ul>\n<li>The forward 4-quarter EPS estimate for the SP 500 jumped to $216.90 this week from last week&#8217;s $215.87. The estimate on 10.1.21 was $213.17 so readers can see that compares are getting tougher and the rate of forward increase is returning to a more &#8220;normal&#8221; state.<\/li>\n<li>The PE ratio this week is 21.3x versus last week&#8217;s 21.8x<\/li>\n<li>The SP 500 earnings yield jumped to 4.69% this week vs last week&#8217;s 4.58% and the 10.1.21 value of 4.89%.<\/li>\n<li>The 4th quarter bottom-up estimate for the SP 500 had it&#8217;s biggest increase since the last two weeks of October &#8217;21 to $51.26 but is still below the 10\/29 peak of $51.70. Judging by Oracle, Costco, Accenture and FedEx, calendar Q4 &#8217;21 earnings should be fine.<\/li>\n<\/ul>\n<p>Let&#8217;s look at some of the tables:<\/p>\n<p><em><strong>SP 500 forward EPS curve:\u00a0<\/strong><\/em><\/p>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500fwdEPScurbe121721.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-12313\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500fwdEPScurbe121721-300x170.png\" alt=\"\" width=\"300\" height=\"170\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500fwdEPScurbe121721-300x170.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500fwdEPScurbe121721-1024x580.png 1024w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500fwdEPScurbe121721-150x85.png 150w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500fwdEPScurbe121721-768x435.png 768w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500fwdEPScurbe121721.png 1087w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>Readers haven&#8217;t seen this table for a while but it shows the forward quarters on a rolling basis, and the various rates of change in the forward EPS, which readers can see look to be accelerating again. However given the time of year &#8211; the next two quarters will likely be dead in terms of revision activity &#8211; lets give it a few more weeks.<\/p>\n<p><em><strong>Expected EPS and revenue growth by quarter:\u00a0<\/strong><\/em><\/p>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500q3q421expgrorates121721.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-12314\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500q3q421expgrorates121721-300x124.png\" alt=\"\" width=\"300\" height=\"124\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500q3q421expgrorates121721-300x124.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500q3q421expgrorates121721-1024x424.png 1024w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500q3q421expgrorates121721-150x62.png 150w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500q3q421expgrorates121721-768x318.png 768w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/12\/SP500q3q421expgrorates121721.png 1175w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>My favorite table every week shows no signs of any change in trend.<\/p>\n<p><em><strong>Summary \/ conclusion: <\/strong><\/em>It was shocking to hear Jay Powell say during the presser on Wednesday of this past week that the US economy&#8217;s unemployment rate at the end of 2022, (per the Fed&#8217;s analysis, dotplotting, whatever you want to call it), is expected to be 3.2%.<\/p>\n<p>When was the last era when the US economy saw a 3.2% unemployment rate ? According to <a href=\"https:\/\/www.thebalance.com\/unemployment-rate-by-year-3305506\">this website<\/a>, it was the late &#8217;60&#8217;s, but the rate never quite dropped to 3.2%. (As of the November &#8217;21 jobs report, today&#8217;s unemployment rate is thought to be 4.2%.)<\/p>\n<p>What&#8217;s even more bizarre is that the 10-year Treasury closed at 1.46% on Wednesday, post the Powell presser, falling to 1.40% Friday, December 17th, &#8217;21. So the 10-year Treasury yield actually fell despite the very hawkish Fed statements.<\/p>\n<p>No one&#8217;s afraid of the Fed I guess.<\/p>\n<p>In terms of 2022, SP 500 EPS growth will be more &#8220;normal&#8221; i.e. probably within 10% &#8211; 15% typical growth rate the last several years.<\/p>\n<p>The pandemic has distorted everything financial, so to speak.<\/p>\n<p>What&#8217;s interesting looking at the expected 2022 sector growth rates in one of the spreadsheets above, is that the sector with the strongest expected 2022 EPS growth rate is Industrials. I will have to do a follow-up post on this.<\/p>\n<p>Take everything you read here (and anywhere else) with great skepticism. Capital markets change quickly.<\/p>\n<p>Thanks for reading.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Last year at this time, expectations for full-year 2021 SP 500 EPS growth (by sector) looked like this: (All data&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-12306","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\/12306","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=12306"}],"version-history":[{"count":9,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/12306\/revisions"}],"predecessor-version":[{"id":12321,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/12306\/revisions\/12321"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=12306"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=12306"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=12306"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}