{"id":6064,"date":"2016-07-09T15:26:33","date_gmt":"2016-07-09T15:26:33","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=6064"},"modified":"2016-07-09T15:26:33","modified_gmt":"2016-07-09T15:26:33","slug":"sp-500-weekly-earnings-update-can-the-sp-500-make-an-all-time-high-off-of-q2-16-earnings","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=6064","title":{"rendered":"SP 500 Weekly Earnings Update: Can the SP 500 Make an All-Time-High off of Q2 &#8217;16 Earnings ?"},"content":{"rendered":"<p>And that is the $64,000 question.<\/p>\n<p>The SP 500 stopped inches short of the record close from May 21 &#8217;16 of 2,130.82.<\/p>\n<p>The first 6 months of 2016 have seen a powerful recovery in commodity prices, which should alleviate the substantial drag on SP 500 earnings from the Energy and Basic Material&#8217;s sectors, both sectors combined comprising roughly 10% of the SP 500 by market cap.<\/p>\n<p>Alcoa, JP Morgan, Wells Fargo and Citi all report this week, which is par for the course so the Street and investors will get a good look at how the big banks and Financial&#8217;s like BlackRock performed in Q2.<\/p>\n<p><em><strong>Q2 &#8217;16 Expected Earnings Growth by Sector:\u00a0<\/strong><\/em><\/p>\n<ul>\n<li>Cons Disc: +8.8%<\/li>\n<li>Health Care +4.3%<\/li>\n<li>Industrial&#8217;s: +3.1%<\/li>\n<li>Utilities: +1.6%<\/li>\n<li>Telecom: -1.0%<\/li>\n<li>Cons Spls: -1.2%<\/li>\n<li>Financial&#8217;s: -5.7%<\/li>\n<li>Technology: -6%<\/li>\n<li>Basic Mat -10%<\/li>\n<li>Energy: -78.2%<\/li>\n<li>SP 500: -4.8%<\/li>\n<\/ul>\n<p>Source: Thomson Reuters<\/p>\n<p><em><strong>Q2 &#8217;16 Expected Revenue Growth by Sector:<\/strong><\/em><\/p>\n<ul>\n<li>Telco: +10.9%<\/li>\n<li>Health Care: +7.9%<\/li>\n<li>Cons Disc: +5.0%<\/li>\n<li>Ute&#8217;s +5.0%<\/li>\n<li>Cons Spls: +1.8%<\/li>\n<li>Financial&#8217;s: +0.2%<\/li>\n<li>Industrial&#8217;s: -1.3%<\/li>\n<li>Technology: -4.9%<\/li>\n<li>Basic Materials: -5.0%<\/li>\n<li>Energy: -25.9%<\/li>\n<li>SP 500: -1.0%<\/li>\n<\/ul>\n<p>Source: Thomson Reuters<\/p>\n<p>Thomson Reuters Weekly Earnings Data (by the numbers):<\/p>\n<ul>\n<li><em><strong>Forward 4-Quarter estimate:<\/strong><\/em> $127.04 vs last week&#8217;s $122.76 (The &#8220;quarterly roll&#8221; occurred this week as the new forward 4-Quarter period is now Q3 &#8217;16 &#8211; Q2 &#8217;17)<\/li>\n<li><em><strong>P.E ratio:<\/strong><\/em> 16.77(x)<\/li>\n<li><em><strong>PEG ratio:<\/strong><\/em> 14.6(x)<\/li>\n<li><em><strong>SP 500 earnings yield:<\/strong><\/em> 5.96%. Despite the rally in the SP 500 this week, the quarterly roll in the fwd 4-quarter estimate lifted the yield from 5.84% to 5.96%<\/li>\n<li><em><strong>Year-over-year growth of the forward estimate:<\/strong><\/em> +1.15% (would have preferred to see +3% &#8211; 4% growth, but not yet).<\/li>\n<\/ul>\n<p><em><strong>Analysis \/ conclusion:<\/strong><\/em> Many pundits talk about the 2 &#8211; 3 quarters of consecutive negative earnings growth for the SP 500 but fewer talk about the revenue growth: even though the Street has seen 3 consecutive quarters of negative earnings growth from the SP 500, investors have seen 5 straight quarters of negative revenue growth. In Q1 and Q2 &#8217;15, revenue growth was negative, but overall EPS growth for the SP 500 was positive.<\/p>\n<p>Here are the numbers: Actual EPS and Revenue growth for SP 500<\/p>\n<p><em><strong>Q3 &#8217;14:<\/strong><\/em> +10.3% EPS growth and +4.1% revenue growth<\/p>\n<p><em><strong>Q4 &#8217;14:<\/strong><\/em> +7% EPS growth and +2.1% revenue growth<\/p>\n<p><em><strong>Q1 &#8217;15:<\/strong><\/em> +2.2% EPS growth and -3.1% revenue growth<\/p>\n<p><em><strong>Q2 &#8217;15:<\/strong><\/em>\u00a0+1.3% EPS growth and -3.4% revenue growth<\/p>\n<p><em><strong>Q3 &#8217;15:<\/strong><\/em>\u00a0-0.08% EPS growth and -4.3% revenue growth<\/p>\n<p><em><strong>Q4 &#8217;15: <\/strong><\/em>-2.9% EPS growth and -3.5% revenue growth<\/p>\n<p><em><strong>Q1 &#8217;16:<\/strong><\/em>\u00a0-5% EPS growth and -1.7% revenue growth<\/p>\n<p>Estimated:<\/p>\n<p><em><strong>Q2 &#8217;16:<\/strong><\/em> -4.8% EPS growth and -1% revenue growth<\/p>\n<p>To answer the headline question, a lot depends on what the estimates do for Q4 &#8217;16 and 2017 with the Q2 &#8217;16 earnings reports.<\/p>\n<p>While stocks move on upside \/ downside surprises, it is the &#8220;voting machine vs weighing machine&#8221; analogy: there is definitely a forward-looking component to stock prices (a statement that should be no surprise to anyone).<\/p>\n<p>If we get stronger-than-expected revenue growth from the SP 500, particularly from Energy and Basic Materials, and most importantly Technology, look for the SP 500 to break to an all-time-high.<\/p>\n<p>I&#8217;ll say right here on this blog, Energy sector <em><strong>revenue<\/strong><\/em> has bottomed with Q4 &#8217;15, as has Basic Materials, which means the worst is in for earnings declines too.<\/p>\n<p>I do think these two sectors will provide some surprises to Q2 &#8217;16 earnings as noted <a href=\"https:\/\/fundamentalis.com\/?p=6038\">a few weeks ago<\/a>.<\/p>\n<p>More to come Sunday, July 10th.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>And that is the $64,000 question. The SP 500 stopped inches short of the record close from May 21 &#8217;16&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":[97,171,95,98,91],"tags":[],"class_list":["post-6064","post","type-post","status-publish","format-standard","hentry","category-basic-materials","category-energy-etfs-xle","category-energy-sector","category-sector-earnings-growth-estimates","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\/6064","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=6064"}],"version-history":[{"count":4,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6064\/revisions"}],"predecessor-version":[{"id":6068,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6064\/revisions\/6068"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6064"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6064"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6064"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}