{"id":6158,"date":"2016-08-06T01:02:25","date_gmt":"2016-08-06T01:02:25","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=6158"},"modified":"2016-08-09T19:01:11","modified_gmt":"2016-08-09T19:01:11","slug":"sp-500-weekly-earnings-update-technology-sector-the-clear-winner-for-q2-16","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=6158","title":{"rendered":"SP 500 Weekly Earnings Update: Technology Sector the Clear Winner for Q2 &#8217;16"},"content":{"rendered":"<p>Looking at the change in &#8220;expected&#8221; sector growth rates for Q2 &#8217;16, Technology is the clear winner, and the fact is Apple has a lot to do with that.<\/p>\n<p>No question the big dog in the yard, has made his presence felt (Apple that is.)<\/p>\n<p>Here is the change in Q2 &#8217;16 sector earnings growth estimates between July 1 &#8217;16 and August 5 &#8217;16:<\/p>\n<ul>\n<li><em><strong>Cons Disc:<\/strong><\/em> +12.5%, vs. +9% on July 1 for 350 basis point improvement in growth.<\/li>\n<li><em><strong>Cons Spls:<\/strong><\/em> +0.3% vs. -1.2% for a 150 basis point improvement in growth.<\/li>\n<li><em><strong>Energy:<\/strong> <\/em>-84.6% vs -78.7% for a 590 basis point deterioration in growth.<\/li>\n<li><em><strong>Financial&#8217;s:<\/strong><\/em> -5% vs -2.3% for a 270 basis point deterioration in growth.<\/li>\n<li><em><strong>Health Care:<\/strong><\/em> +7.3%, vs +4.5% for a 280 basis point improvement in growth.<\/li>\n<li><em><strong>Industrial&#8217;s:<\/strong><\/em> +2.5% vs. +4.2% for a 170 deterioration in growth. GE and Honeywell both had a tough quarter.<\/li>\n<li><em><strong>Basic Mat:<\/strong><\/em> -7.1% vs -9.9% for a 280 basis point improvement in growth.<\/li>\n<li><em><strong>Technology:<\/strong><\/em> +0.6% vs -5.7% for a <em><strong>630 basis point improvement<\/strong><\/em> in growth.<\/li>\n<li><em><strong>Telco:<\/strong> <\/em>-1.2% vs -0,5% for a 70 basis point improvement in growth.<\/li>\n<li><em><strong>Utilities:<\/strong><\/em> +4.7% vs +2.1% for a 260 basis point improvement in growth.<\/li>\n<li><em><strong>SP 500:<\/strong><\/em> -2.6% vs -3.8% for a 120 basis point improvement in growth.<\/li>\n<\/ul>\n<p>Technology&#8217;s 630 basis point in higher growth revision is reflected in the bounce in Technology in July &#8217;16, when the sector rose 7% on the month.<\/p>\n<p>More importantly, for Q3 &#8217;16, Technology is the only sector to see its expected growth rate revised higher, from +2.4% as of July 1 to +3.1% as of August 5th, not a huge amount but every other sector has seen lower revisions for Q3 &#8217;16 since July 1 so &#8220;relatively&#8221; speaking Technology&#8217;s earnings growth is looking quite good. Given that higher revision for Q3 &#8217;16 in the face of lower revisions for other sectors, look for Tech&#8217;s relative strength to continue.<\/p>\n<p><em><strong>By the Numbers: (Source: Thomson Reuters data)\u00a0<\/strong><\/em><\/p>\n<ul>\n<li><em><strong>Forward 4-quarter estimate:<\/strong><\/em> $126.12 vs last week&#8217;s $126.52<\/li>\n<li><em><strong>P.E ratio:<\/strong><\/em> 17.3(x)<\/li>\n<li><em><strong>PEG ratio:<\/strong><\/em> 12(x) &#8211; not meaningful<\/li>\n<li><em><strong>SP 500 earnings yield:<\/strong> <\/em>5.78% vs last week&#8217;s 5.83%<\/li>\n<li><em><strong>Year-over-year growth of the forward estimate:<\/strong><\/em> +1.48%, versus last week&#8217;s 1.30%, and the highest growth rate since April 29 &#8217;16.<\/li>\n<\/ul>\n<p><em><strong>Analysis \/ conclusion: <\/strong><\/em>The SP 500 starts to lap the collapse of China last summer in August &#8211; September, which while it was a market event in China was also economic and started to show up in Q3 &#8217;16 earnings for the SP 500. Technology&#8217;s numbers look very good &#8211; the higher expected earnings growth rates and the positive revisions bode well for the sector, even though I thought Apple might be a drag when <a href=\"https:\/\/fundamentalis.com\/?p=6091\">this<\/a> was written a few weeks ago.<\/p>\n<p>Lapping the &#8220;China comp&#8217;s&#8221; from last summer should start to pull the &#8220;y\/y growth in the forward estimate&#8221; higher, but I&#8217;ve been expecting that for 10 months now and have been clearly wrong.<\/p>\n<p>Coming into 2016, the two largest sector overweights for clients were Technology and Financials, and both were crushed YTD &#8217;16 as of June 30th. Both have come back nicely with Technology the stronger of the two. Financial&#8217;s had a good day today as the 10-year Treasury yield rose off the strong payroll report. Financial&#8217;s need s a steeper yield curve to outperform: think 2013.<\/p>\n<p>Thanks for reading &#8211; more to come this weekend.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Looking at the change in &#8220;expected&#8221; sector growth rates for Q2 &#8217;16, Technology is the clear winner, and the fact&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":[90,84,53,98,123,91],"tags":[],"class_list":["post-6158","post","type-post","status-publish","format-standard","hentry","category-apple-aapl","category-financial-sector","category-financials","category-sector-earnings-growth-estimates","category-technology","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\/6158","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=6158"}],"version-history":[{"count":6,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6158\/revisions"}],"predecessor-version":[{"id":6171,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6158\/revisions\/6171"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6158"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6158"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6158"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}