Given that the last day of June fell over the weekend, we won’t get the July “forward 4-quarter” estimate for the S&P 500 until next Friday, July 6th. However, if the pattern remains similar to previous quarterly increases,\u00a0we would expect the forward 4-quarter estimate to increase to$110 per share (or better) when we see the detail next Friday.<\/p>\n
As of June 29th, the forward 4-quarter estimate for the S&P 500 was $107.25, resulting in the S&P 500 trading at 12(x) earnings as of Friday’s close.<\/p>\n
Many are now worried about guidance and preannouncements for the 2nd quarter when q2 ’12 earnings start with Alcoa’s release on July 9th.<\/p>\n
Here is how q1 ’12 eps growth by sector fell out for the S&P 500 (data from ThomsonReuters):<\/p>\n
Industrials +17.4%<\/p>\n
Financials +13.6%<\/p>\n
Technology +14.8%<\/p>\n
Consumer Discr +10.1%<\/p>\n
Consumer Staples +5.1%<\/p>\n
HealthCare + 3.8%<\/p>\n
Energy +1.2%<\/p>\n
Telecom -2.8%<\/p>\n
Utilities -8.2%<\/p>\n
S&P 500 +8.1%<\/p>\n
What is ironic is that telecom and utilities were the two best performing sectors in the S&P 500 in q2 ’12, while financials and technology were the two worst. (Note the earnings growth relative to q2 ’12 sector performance. )<\/p>\n
While Bespoke now has q2 ’12 earnings growth as decidedly negative, our ThomsonReuters data indicates that q2 ’12 earnings growth is still expected at +5.8% however Bank of America is thought to be disproportionally contributing to q2 ’12, so ex Bank of America and ex Financials, q2 ’12 earnings growth is expected at 0.06% and -0.7% respectively or flat on year-over-year. Once earnings start getting released, there tends to be a minor positive bias to estimates.<\/p>\n
Preannouncements by Ford and Nike last week didnt help. The negative-to-positive preannouncement ratio is decidedly negative. (We’ll be out with a comment on Ford later this week.)<\/p>\n
To conclude pessimism is rampant (I heard from a CNBC anchor this afternoon, that “at best, the S&P 500 will be breakeven in the 2nd half of year”), and no one likes the market. Year-over-year earnings growth is expecetd to be subdued for q2 and q3 ’12, and expectations for earnings are very low.<\/p>\n
Long FDX, F and NKE (smaller position)<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
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