In a word, “maybe”, but we’ll know more in a few weeks.<\/p>\n
SP 500 earnings data (Thomson Reuters):\u00a0<\/strong><\/em><\/p>\n Commentary:<\/strong><\/em>\u00a0The y\/y growth rate of the forward estimate is headed in the right direction, but at a snail’s pace. The Thomson data is as of Thursday night, April 28th, so the data that is missing for readers is how Energy sector estimates were impacted by Friday morning’s release of Q1 ’16 financial results by Exxon and Chevron. (Long a small amount of XOM, bigger weights in XLE, IYE.)<\/p>\n Here is what caught my eye this weekend:\u00a0FC-eps estimate revisions<\/a>. Readers have seen this table before here <\/a>on Fundamentalis, but note how as we moved into the 3rd week of Q1 ’16 financial results, the number of positive revisions rose above 50%, following the typical pattern highlighted in the linked blog post from March 14th, 2016.<\/p>\n But here is what is interesting about the past week’s revisions: we are seeing positive revisions above 50% without a strong SP 500. Look at last October, 2015, and the Q3 ’15 revisions on the spreadsheet, and then if we go back and look at monthly returns, the SP 500 rose over 8% last October ’15, following the China collapse.<\/p>\n It is probably no mystery to readers that when the SP 500 is rallying, Street analysts tend to be more optimistic about forward earnings, and like Q4 ’15 earnings reports, when the SP 500 is falling, the analysts temper forward estimates.<\/p>\n In fact, Thomson noted that the technology sector this past week saw 33% of the reporting companies miss EPS estimates. Apple (long AAPL for clients with about a 2% weight) is a huge distortion to the sector given that Apple represents a 3% market cap weight and a 5% earnings weight to the SP 500, just by itself (my words, not Thomson’s). As Thomson Reuters noted this weekend in “This Week in Earnings”, “if Apple is excluded (from the Tech sectors earnings), earnings growth for the Tech sector would increase from -4.7% to +4.6%, a 9.3% percentage point improvement.”<\/p>\n Here is what Factset and John Butters noted this weekend in the Factset ” Earnings Insight”:\u00a0<\/em><\/p>\n Summary \/ conclusion: <\/strong><\/em>Given that with the SP 500’s barely positive return in 2015 and now, barely positive return after the first 4 months of 2016, analysts seem reluctant to raise forward estimates, but they do appear to be getting “less negative”. \u00a0That doesn’t mean that the Street is becoming “more bullish” it just means there is less downward pressure on forward numbers. There is a difference between “less negative” and “more bullish”. (Kind of like “Tastes Great vs. Less Filling”.)<\/p>\n There is 2 weeks left in earnings season and we will hear from more Energy and retail business over the next few weeks.<\/p>\n From a bigger-picture perspective, here is how the annual SP 500 EPS estimates look:<\/p>\n The SP 500’s actual EPS has gone nowhere now for 16 months. Absent a significant shift to socialism, when the pattern breaks, expect higher EPS and ultimately higher stock prices.<\/p>\n The weaker dollar (DXY index) will continue to help, particularly if it breaks down here and heads below 93, and the turn continues in the Energy and Basic Materials \/ commodity sectors.<\/p>\n\n
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