{"id":6762,"date":"2017-03-11T14:55:29","date_gmt":"2017-03-11T14:55:29","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=6762"},"modified":"2017-03-11T14:55:29","modified_gmt":"2017-03-11T14:55:29","slug":"sp-500-weekly-earnings-update-forward-growth-rate-still-moving-higher","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=6762","title":{"rendered":"SP 500 Weekly Earnings Update: Forward Growth Rate Still moving Higher"},"content":{"rendered":"<p>Basically, 495 of the SP 500 have reported Q4 &#8217;16 earnings by now, so we look forward as they say, and the &#8220;Forward 4-quarter Growth Rate&#8221; continues to push higher.<\/p>\n<p><em><strong>Thomson Reuters I\/B\/E\/S data by the numbers: <\/strong><\/em><\/p>\n<ul>\n<li><em><strong>Forward 4-quarter estimate:<\/strong><\/em> $131.07<\/li>\n<li><em><strong>P.E ratio:<\/strong><\/em> 18(x)<\/li>\n<li><em><strong>PEG ratio:<\/strong><\/em> 2.1(x)<\/li>\n<li><em><strong>SP 500 earnings yield:<\/strong><\/em> 5.52% up from last week&#8217;s 5.51%<\/li>\n<li><em><strong>Year-over-year growth of the forward estimate:<\/strong><\/em> +8.62% vs last week&#8217;s +8.49%<\/li>\n<\/ul>\n<p>Almost every day we keep hearing about the SP 500&#8217;s &#8221; extended valuation&#8221; at 18(x) earnings, which, with the exception of 2007 &#8211; 2008, is typically not a historical P.E valuation where the SP 500 has encountered problems, meaning a meaningful market top and meaningful correction have followed.<\/p>\n<p>Here is the trend in the &#8220;y\/y growth rate of the forward estimate&#8221;:<\/p>\n<ul>\n<li><em><strong>3\/10\/17:<\/strong><\/em> +8.62%<\/li>\n<li><em><strong>3\/3\/17:<\/strong><\/em> +8.49%<\/li>\n<li><em><strong>2\/24\/17:<\/strong><\/em> +8.41%<\/li>\n<li><em><strong>2\/17\/17:<\/strong><\/em> +7.93%<\/li>\n<li><em><strong>2\/10\/17:<\/strong><\/em> +7.88%<\/li>\n<li><em><strong>1\/7\/17:<\/strong><\/em> +4.81%<\/li>\n<li><em><strong>12\/9\/16:<\/strong><\/em> +4.19%<\/li>\n<li><em><strong>11\/4\/16:<\/strong><\/em> +3.59%<\/li>\n<\/ul>\n<p>Seriously, if the &#8220;forward&#8221; earnings estimates are getting pulled higher like this, week after week, it should portend positive things for the SP 500.<\/p>\n<p>The Energy drag is over &#8211; will have a separate post on the Energy sector and the SP 500 Ex-Energy tomorrow.<\/p>\n<p>The &#8220;bottom-up&#8221; SP 500 estimate for calendar 2017 is looking for 10% growth &#8211; when the forward 4-quarter estimate and the bottom-up estimate meet, that is where i think both will stabilize, but 2017 fiscal policy and tax reform could add as much as little as $3 or as much as $7 to the final estimates.<\/p>\n<p>With credible tax reform, the Street could see $133 &#8211; $134 by the end of &#8217;17, which leaves the SP 500 trading at 17.5(x) forward earnings for better than 10% growth.<\/p>\n<p>In addition, we haven&#8217;t discussed the old &#8220;P.E expansion \/ contraction&#8221; debate. Tax reform if done credibly and sensibly, I would think is a &#8220;P.E expanding&#8221; event.<\/p>\n<p>Corrections can occur at any time &#8211; as long as the 10-year Treasury yield doesn&#8217;t rise too quickly, everything happening in 2017 looks positive.<\/p>\n<p>One caveat: in 2011, the SP 500 corrected 20% peak-to-trough and earnings growth was better than 15% that year. (We saw an incredible rally in Q4 &#8217;11, pulling the SP 500&#8217;s return positive on the year.) In 2011, the Energy sector carried the ball, Tech and Financial&#8217;s were still punk, and Energy was about 15% of the SP 500&#8217;s market cap.<\/p>\n<p>From an earnings perspective, I do think the SP 500 remains in very good shape.<\/p>\n<p>More tomorrow &#8211; thanks for reading&#8230;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Basically, 495 of the SP 500 have reported Q4 &#8217;16 earnings by now, so we look forward as they say,&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":[184,185,140,91],"tags":[],"class_list":["post-6762","post","type-post","status-publish","format-standard","hentry","category-184","category-2017-fiscal-policy","category-pe-expansion-contraction","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\/6762","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=6762"}],"version-history":[{"count":3,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6762\/revisions"}],"predecessor-version":[{"id":6765,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6762\/revisions\/6765"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6762"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6762"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6762"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}