{"id":5935,"date":"2016-05-08T14:47:21","date_gmt":"2016-05-08T14:47:21","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=5935"},"modified":"2016-05-08T14:47:21","modified_gmt":"2016-05-08T14:47:21","slug":"the-forward-4-quarter-growth-rate-continues-to-have-trouble-gaining-traction","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=5935","title":{"rendered":"The Forward 4-Quarter Growth Rate Continues to Have Trouble Gaining Traction"},"content":{"rendered":"<p><em><strong>Thomson Reuters data &#8220;by the numbers&#8221;:\u00a0<\/strong><\/em><\/p>\n<ul>\n<li><em><strong>Forward 4-quarter estimate:<\/strong><\/em> $123.01 this week versus last week&#8217;s $123.17.<\/li>\n<li><em><strong>P.E ratio:<\/strong><\/em> 16.7(x)<\/li>\n<li><em><strong>PEG ratio<\/strong><\/em>: 24(x) still volatile based on the volatility of the growth rate and almost completely irrelevant as a metric for now.<\/li>\n<li><em><strong>SP 500 earnings yield:<\/strong><\/em> 5.98%, or 3rd week in a row between 5.96% and 5.98%.<\/li>\n<li><em><strong>Year-over-year growth of forward estimate:<\/strong><\/em> drops to +0.69% versus last week&#8217;s 2.09% and ends the 4-week string of increases.<\/li>\n<\/ul>\n<p><em><strong>Analysis:<\/strong><\/em>\u00a0The most puzzling and frustrating aspect to SP 500 earnings, and why being &#8220;table-pounding&#8221; bullish on the SP 500 and the general equity market is ill-advised, is that tracking the &#8220;year-over-year growth rate of the forward 4-quarter estimate&#8221; (referred to as &#8220;the growth rate&#8221;) remains a lesson in frustration. Last fall, mid-October &#8217;15 to be exact, <a href=\"https:\/\/fundamentalis.com\/?p=5273\">I thought the growth rate<\/a>\u00a0would start to gradually increase through year-end and the 4th quarter of 2015 as the SP 500 lapped easier crude oil and Energy sector compares, and the strong dollar ramp.<\/p>\n<p>Instead, the growth rate remains mired between 0% &#8211; 2%, and stuck in the mud, even though crude oil and commodity prices have rallied, and the dollar index (DXY) has fallen from 100 to 92.<\/p>\n<p>Here is the progression in the growth rate the last five weeks:<\/p>\n<ul>\n<li>5\/6\/16:+0.69%<\/li>\n<li>5\/1\/16:+2.09%<\/li>\n<li>4\/22\/16:+1.81%<\/li>\n<li>4\/15\/16:+1.09%<\/li>\n<li>4\/8\/16:+0.95%<\/li>\n<\/ul>\n<p>Just as the number starts to show signs of life, this week it was hammered once again.<\/p>\n<p>The one caveat is that this is a &#8220;top-down&#8221; estimate or partially a top-down estimate, so forward estimates put out by bearish strategists could be unduly influencing the forward estimates.<\/p>\n<p>The other explanation, as was noted on this blog <a href=\"https:\/\/fundamentalis.com\/?p=5785\">here<\/a>, is that when I&#8217;ve studied past analyst revisions data, the Street is as influenced by the market action and direction far more than you&#8217;d think (in my opinion). Analysts and strategists seem as cowed today as at any point in the last 10 years since &#8211; given the flat returns of the last 18 months and after the horrific drop in crude oil and commodity prices &#8211; so many Street prognosticators have to be thinking &#8220;why stick my neck out on a bullish forecast for an earnings or revenue estimate ?&#8221; which is exactly why i remain bullish.<\/p>\n<p>The reason a premium is placed on the &#8220;forward 4-quarter&#8221; dollar estimate is because it is a leading indicator for a data set that is more coincident or lagging in nature.<\/p>\n<p><em><strong>Conclusion: <\/strong><\/em>While the Street is tilted otherwise, I do think the SP 500 will eventually break out above the 2,130 &#8211; 2,150 ceiling within which it is contained. The SP 500 is working on 18 straight months of a 0% &#8211; 1% return, which is maybe why hedge funds are getting push-back on the 2% \/ 20% fee structure. The SP 500 is looking at its third straight year of $118 &#8211; $119 in dollar earnings (per share) and this too will likely break higher.<\/p>\n<p>Coming into the year I thought the SP 500 would return 10% and the sector overweights were Technology and Financials. Financials were hammered in Q1 &#8217;16, but have subsequently bounced and Technology has been hammered in Q2 &#8217;16 (now becoming oversold). but I&#8217;m sticking with these positions. The sentiment data continues to be encouraging from a contrarian perspective. The Presidential election and the associated rhetoric is a strange wildcard, that is tough to quantify.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Thomson Reuters data &#8220;by the numbers&#8221;:\u00a0 Forward 4-quarter estimate: $123.01 this week versus last week&#8217;s $123.17. P.E ratio: 16.7(x) PEG&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":[92,91],"tags":[],"class_list":["post-5935","post","type-post","status-publish","format-standard","hentry","category-fwd-4-qtr-growth-rate-sp-500","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\/5935","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=5935"}],"version-history":[{"count":9,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/5935\/revisions"}],"predecessor-version":[{"id":5944,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/5935\/revisions\/5944"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5935"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5935"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5935"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}