{"id":12570,"date":"2022-02-06T10:56:23","date_gmt":"2022-02-06T16:56:23","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=12570"},"modified":"2022-02-06T10:56:23","modified_gmt":"2022-02-06T16:56:23","slug":"sp-500-earnings-update-earnings-revisions-solid-this-week-but-watch-that-10-year-treasury-yield","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=12570","title":{"rendered":"SP 500 Earnings Update: Earnings Revisions Solid This Week, but Watch That 10-Year Treasury Yield"},"content":{"rendered":"<p>The big issue for the SP 500 and the US stock market (in my opinion) is that &#8211; after the Friday jobs report, which was much stronger-than-expected at +476,000 net new jobs added to the US economy in January &#8217;22 &#8211; the 10-year Treasury is now testing the pre-Covid, early 2020 high yield print of 1.91%.<\/p>\n<p>The fact is SP 500 earnings could be great this year and if the 10-year Treasury yield gets much above 2%, it&#8217;s going to weigh on the equity market.<\/p>\n<p>However the fact is, this week&#8217;s IBES data by Refinitiv, which is the source of this blog&#8217;s earnings work, showed strong revisions to forward EPS data and that may not include Amazon&#8217;s Q4 &#8217;21 quarter or the Friday, February 4th, 2022, jobs report since Refinitiv cuts off the data as of Thursday night.<\/p>\n<p>Here are the numbers:<\/p>\n<ul>\n<li>The forward 4-quarter estimate increased to $225.02 versus last week&#8217;s $223.07 and the start of this year&#8217;s initial estimate of $223.25;<\/li>\n<li>The PE ratio on the forward estimate is 20x;<\/li>\n<li>The SP 500 &#8220;earnings yield&#8221; finished the week at 5% even, versus 5.05% and 5.09% the last two weeks;<\/li>\n<li>The Q4 &#8217;21 bottom-up quarterly estimate finally moved off the $51 level which it has been sitting at since July &#8217;31 &#8217;21, to end this week at $53.12;<\/li>\n<li><\/li>\n<\/ul>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500sectorEPSgrowth2422.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-12571\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500sectorEPSgrowth2422-300x96.png\" alt=\"\" width=\"300\" height=\"96\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500sectorEPSgrowth2422-300x96.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500sectorEPSgrowth2422-1024x329.png 1024w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500sectorEPSgrowth2422-150x48.png 150w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500sectorEPSgrowth2422-768x246.png 768w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500sectorEPSgrowth2422-1536x493.png 1536w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500sectorEPSgrowth2422-1600x513.png 1600w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500sectorEPSgrowth2422.png 1611w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>Looking at the above table, you can tell by this Refinitiv data that this blog tracks weekly, that 2022 will be a year of tough comparisons versus 2021, as interest rates rise, which could be the double-whammy for the SP 500.<\/p>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/Sp500sharewtdEPS2422.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-12574\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/Sp500sharewtdEPS2422-300x151.png\" alt=\"\" width=\"300\" height=\"151\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/Sp500sharewtdEPS2422-300x151.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/Sp500sharewtdEPS2422-150x75.png 150w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/Sp500sharewtdEPS2422-768x386.png 768w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/Sp500sharewtdEPS2422.png 820w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>Here&#8217;s another chart from Refinitiv that is always on the first page of &#8220;This Week in Earnings&#8221;.<\/p>\n<p>The chart shows the actual dollar increase in net income every quarter, which I like. These net income spikes always happen around the mega-cap reporting period, and then the line typically flattens out in the last month of the quarter.<\/p>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500sharewtdeps123121.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-12576\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500sharewtdeps123121-300x142.png\" alt=\"\" width=\"300\" height=\"142\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500sharewtdeps123121-300x142.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500sharewtdeps123121-150x71.png 150w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500sharewtdeps123121-768x364.png 768w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500sharewtdeps123121.png 825w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>Here&#8217;s the same chart from 12\/31\/21 showing the whole of the Q3 &#8217;21 reporting period.<\/p>\n<p>Personally I love that Refinitiv provides this to readers.<\/p>\n<p>If you ever want to watch a client&#8217;s or reader&#8217;s eyes glaze over, start talking &#8220;earnings per share&#8221; (EPS) and the concept of EPS to stock prices.<\/p>\n<p>The favorite SP 500 EPS and revenue table:<\/p>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500Q421Q122EPSrevenuegrowthrates2422.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-12578\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500Q421Q122EPSrevenuegrowthrates2422-300x178.png\" alt=\"\" width=\"300\" height=\"178\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500Q421Q122EPSrevenuegrowthrates2422-300x178.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500Q421Q122EPSrevenuegrowthrates2422-150x89.png 150w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500Q421Q122EPSrevenuegrowthrates2422-768x456.png 768w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/SP500Q421Q122EPSrevenuegrowthrates2422.png 1025w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>Note the jump in &#8220;expected&#8221; 2022 EPS and revenue growth rates.<\/p>\n<p><em><strong>Summary \/ conclusion: <\/strong><\/em>Removing the tremendous liquidity added by the Fed in March &#8217;20 is now the story for &#8217;22 and it&#8217;s likely to be far more powerful to equity market valuations than what would or could be a decent year for SP 500 earnings growth.<\/p>\n<p>Readers can see in the first spreadsheet that 2021 SP 500 EPS is expected to be +50% growth, while 2022 might be just 10% &#8211; 12%.<\/p>\n<p>Russia &#8211; Ukraine is another wild card, as is the fact that many other central banks are already raising short-term interest rates.<\/p>\n<p>Lisa Abramowicz, who I think is an excellent Bloomberg reporter, posted this tweet on Friday on the decline in negative-yielding debt around the globe:<\/p>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/lisaabramowicznegyielddebt2422.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-12581\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/lisaabramowicznegyielddebt2422-300x268.png\" alt=\"\" width=\"300\" height=\"268\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/lisaabramowicznegyielddebt2422-300x268.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/lisaabramowicznegyielddebt2422-150x134.png 150w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/02\/lisaabramowicznegyielddebt2422.png 637w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>Maybe liquidity is coming out of the global financial system even faster than we think.<\/p>\n<p>Take everything you read here with substantial skepticism. Do your own homework. Past performance is no guarantee of future results.<\/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","protected":false},"excerpt":{"rendered":"<p>The big issue for the SP 500 and the US stock market (in my opinion) is that &#8211; after the&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":[190,91],"tags":[],"class_list":["post-12570","post","type-post","status-publish","format-standard","hentry","category-10-year-treasury-yield","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\/12570","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=12570"}],"version-history":[{"count":10,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/12570\/revisions"}],"predecessor-version":[{"id":12585,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/12570\/revisions\/12585"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=12570"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=12570"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=12570"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}