{"id":6356,"date":"2016-10-08T14:46:50","date_gmt":"2016-10-08T14:46:50","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=6356"},"modified":"2016-10-08T14:46:50","modified_gmt":"2016-10-08T14:46:50","slug":"q3-16-earnings-for-sp-500-earnings-growth-the-energy-sector-looms-large","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=6356","title":{"rendered":"Q3 &#8217;16 Earnings &#8211; For SP 500 Earnings Growth, the Energy Sector Looms Large"},"content":{"rendered":"<p>While we won&#8217;t start to hear most of the energy sector results until the last week of October &#8217;16, Schlumberger (SLB) and Halliburton (HAL) report the week after next.<\/p>\n<p>Exxon (XOM) and Chevron (CVX) both report October 28th, 2016 or the last week of October.<\/p>\n<p>From a &#8220;top-down&#8221; view of the SP 500, the Energy sector is key to driving SP 500 earnings, since it has (without a doubt), been the sector that has been the biggest drag on the SP 500 since late 2014.<\/p>\n<p>Here is the <em><strong>historical (and projected) Energy sector earnings<\/strong><\/em> (first column) and <em><strong>revenue<\/strong><\/em> (second column) growth: (source:Thomson Reuters)<\/p>\n<ul>\n<li><em><strong>Q3 &#8217;17:<\/strong><\/em> +234%, +27.7% (est)<\/li>\n<li><em><strong>Q2 &#8217;17:<\/strong><\/em> +495%, +31.9% (est)<\/li>\n<li><em><strong>Q1 &#8217;17:<\/strong><\/em> N\/A, +43% (est)<\/li>\n<li><em><strong>Q4 &#8217;16:<\/strong><\/em> +2%, +8.3% (est)<\/li>\n<li><em><strong>Q3 &#8217;16:<\/strong><\/em> -68.4%, -11.3% (est)<\/li>\n<li>&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;&#8211;<\/li>\n<li><em><strong>Q2 &#8217;16:<\/strong><\/em>\u00a0 -85.1%, -24.6%<\/li>\n<li><em><strong>Q1 &#8217;16:<\/strong><\/em>\u00a0-106.7%, -29.6%<\/li>\n<li><em><strong>Q4 &#8217;15: <\/strong><\/em>-74.4%, -35.4%<\/li>\n<li><em><strong>Q3 &#8217;15: <\/strong><\/em>-57.1%, -35.95%<\/li>\n<li><em><strong>Q2 &#8217;15: <\/strong><\/em>-56.4%, -31.7%<\/li>\n<li><em><strong>Q1 &#8217;15: <\/strong><\/em>-57.9%, -34.7%<\/li>\n<li><em><strong>Q4 &#8217;14:<\/strong><\/em> -21.8%, -13.5%<\/li>\n<li><em><strong>Q3 &#8217;14:<\/strong><\/em>\u00a0+10.3%, -2.6%<\/li>\n<\/ul>\n<p><em><strong>Analysis:<\/strong><\/em> with crude up near $100 during the 2nd, 3rd quarter of 2014, Energy&#8217;s market cap as a percentage of the SP 500 was 12% &#8211; 14%. Today, as of early October &#8217;16, Energy&#8217;s market cap weight is 7%.<\/p>\n<p>Using<a href=\"https:\/\/fundamentalis.com\/?p=6232\"> this blog post<\/a> from August 27th, 2016, if readers click would click on and enlarge the spreadsheet, because of the low level of net income for the Energy sector, the top 5 stocks in the sector comprise all the revenue and earnings for the sector, and Exxon remains the big dog in the yard so to speak.<\/p>\n<p>Q3 &#8217;16 is expected to see its best quarter for Energy revenue growth since late &#8217;14.<\/p>\n<p>Q4 &#8217;16 is expected to see it&#8217;s first quarter of y\/y revenue growth in 8 quarters.<\/p>\n<p>For the sector as a whole, since the above blog post 6 weeks ago, Q4 &#8217;16 Energy sector earnings and revenue expectations have fallen from +5.9% and +11.8%, to +2% and +8.3% today (see above table).<\/p>\n<p>While 3rd quarter earnings are important, I am watching the 4th quarter &#8217;16 earnings and revenue estimate changes.<\/p>\n<p>It is the 4th quarter estimate changes that will be the key tell for the sector (in my opinion).<\/p>\n<p>Given the action in WTI, trading over $50 this past week, and trying to break out, crude&#8217;s trading is important.<\/p>\n<p>If WTI does break over $50 and above the June &#8217;16 highs, it would be hard to think Energy under-performs the SP 500.<\/p>\n<p>The Energy weight for clients is between 5% &#8211; 10% today, and consists of the IYE, OIH, and XLE.<\/p>\n<p><em><strong>Thomson Reuters data (by the numbers):\u00a0<\/strong><\/em><\/p>\n<ul>\n<li><em><strong>Forward 4-quarter estimate: $129.54<\/strong><\/em>. ($129 was <a href=\"https:\/\/fundamentalis.com\/?p=6338\">my estimate<\/a> from last week. Close. )<\/li>\n<li><em><strong>P.E ratio:<\/strong><\/em> 16.6(x)<\/li>\n<li><em><strong>PEG ratio:<\/strong><\/em> 5.7(x)<\/li>\n<li><em><strong>SP 500 earnings yield:<\/strong><\/em> 6.01%, on the increase in the forward estimate vs. 5.77% last week.<\/li>\n<li><em><strong>Year-over-year growth of forward estimate:<\/strong><\/em> +2.91%, the highest since January &#8217;15 or 21 months ago<\/li>\n<\/ul>\n<p>With the Columbus Day weekend, will have more blog posts over the long holiday weekend.<\/p>\n<p>Thanks for reading.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>While we won&#8217;t start to hear most of the energy sector results until the last week of October &#8217;16, Schlumberger&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":[3,89,171,95,162,91],"tags":[],"class_list":["post-6356","post","type-post","status-publish","format-standard","hentry","category-earnings","category-earnings-estimate-revisions","category-energy-etfs-xle","category-energy-sector","category-sp-500-earnings-yield","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\/6356","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=6356"}],"version-history":[{"count":10,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6356\/revisions"}],"predecessor-version":[{"id":6366,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6356\/revisions\/6366"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6356"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6356"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6356"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}