While most market watchers were expecting q3 ’12 to be a repeat of q3 ’10 and q3 ’11, in fact it surprised everybody, with the S&P 500 returning 6% this quarter, after q1 ’12’s 12% return.<\/p>\n
The problem the Street seems to be having is keeping up with the S&P 500, as this year’s 16% total return for the key benchmark has caught a lot of investors off guard and defensively positioned.<\/p>\n
So what’s next ? This coming week, October 1 – October 5th, there are not a whole lot of large-cap S&P 500 companies reporting, thus we wait for q3 ’12 earnings to start the week after next, with Alcoa and GE likely to lead off the quarter.<\/p>\n
For q2 ’12, core S&P 500 operating earnings grew about 1.5% – 2% (after excluding Bank of America’s strong compare) on +1% revenue growth, and for the q3 ’12, consensus is expecting -1% to -2% decline in operating\u00a0eps for the S&P 500 on -1% revenue growth. The third quarter is expected to be the lowest year-over-year earnings growth for the S&P 500 since mid 2009, or the recession’s bottom.<\/p>\n
The “forward 4-quarter estimate” for the S&P 500 as of Friday was $107.89, just below the record estimate of $111 on July 14th, but still above, the recent low of $105 in late March. Despite the hand-wringing and consternation over S&P 500 earnings, the forward estimate has remained remarkably stable the last 12 months.<\/p>\n
The point being that expectations are very low for q3 ’12 results, even though the market continues to trade with an overall positive tone.<\/p>\n
Here is q3 ’12 and q4 ’12 expected earnings growth for each sector of the S&P 500 both as of Friday, September 28th, and as of July 1 (July is in first column):<\/p>\n
3rd quarter, 2012<\/strong><\/em>:<\/p>\n Cons discr: 13.2% and 7.5%<\/p>\n Cons stapl: 5.2% and 2.0%<\/p>\n Energy: -14% and -20%<\/p>\n Financials: 4.2% and 5.5%<\/p>\n Hlth Care: 0.2% and -2.7%<\/p>\n Industrials: 10.1% and 3.7%<\/p>\n Materials: -3.3% and -21.5%<\/p>\n Technology: 13.1% and 2.1%<\/p>\n Telecom: -8.7% and -12.1%<\/p>\n Utilities: -7.1% and -7.6%<\/p>\n S&P 500 3.1% and -2.1%<\/p>\n Perhaps\u00a0ironically, Financials are the only sector to improve in terms of y\/y eps growth estimates from July 1 through Sept 28th. The XLF was up 6.5% in the 3rd quarter alone (excluding the dividend) while JP Morgan rose 13% in the 3rd quarter, also excluding the dividend. Energy and materials continue to see downward revisions to q3 ’12 estimates.<\/p>\n 4th quarter, 2012:<\/strong> <\/em><\/p>\n * Cons discr: 20.6% and 16.8%<\/p>\n * Cons stpl: 8.6% and 7.2%<\/p>\n * Energy: 5.8% and -1.5%<\/p>\n * Financials: 26.6% and 28.4%<\/p>\n *Hlth Care: 5.2% and 2.6%<\/p>\n * Industrials: 8.5% and 3.5%<\/p>\n * Materials: 38.8% and 23%<\/p>\n * Technology: 15.3% 9.6%<\/p>\n * Telecom: 11.7% and 3.6%<\/p>\n * Utilities:\u00a01.7% and -4.4%<\/p>\n * S&P 500 9.8% and 13.9%<\/p>\n Once again, Financials are the only sector to show an improvement in growth estimates from July 1 to September 28th, in q4, similar to q3. Is there a revival occurring in Financials ? Is this the reason the stock market maintains a persistent bid despite what has been pretty weak economic and political news ? The Financial sector has long been considered the market’s “General” meaning that Financials often lead us higher. Are we finally seeing a turn in the prospects for this sector of the stock market ? Inquiring minds want to know.<\/p>\n Interesting that Barron’s cover story this week was on Goldman Sachs (GS), a key financial stock for both the sector and the market. We have Goldman’s tangible book value (TBV) at $130 per share, so GS is still trading at a discount to tangible book. Haven’t read the article yet.<\/p>\n We’ll be out tomorrow with more sector, asset class and individual stock commentary. Enjoy your Saturday evening.<\/p>\n","protected":false},"excerpt":{"rendered":" While most market watchers were expecting q3 ’12 to be a repeat of q3 ’10 and q3 ’11, in fact…<\/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":[3,1],"tags":[],"class_list":["post-471","post","type-post","status-publish","format-standard","hentry","category-earnings","category-uncategorized"],"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\/471","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=471"}],"version-history":[{"count":11,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/471\/revisions"}],"predecessor-version":[{"id":488,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/471\/revisions\/488"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=471"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=471"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=471"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}