{"id":7286,"date":"2017-11-04T00:00:47","date_gmt":"2017-11-04T00:00:47","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=7286"},"modified":"2017-11-04T00:00:47","modified_gmt":"2017-11-04T00:00:47","slug":"sp-500-earnings-forward-4-qtr-growth-rate-hits-10-58-still-not-seeing-p-e-expansion","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=7286","title":{"rendered":"SP 500 Earnings: Forward 4-Qtr Growth rate hits +10.58%; Still Not Seeing P.E Expansion"},"content":{"rendered":"<p>The year-over-year growth rate of the SP 500 forward earnings estimate tracks the &#8220;expected&#8221; forward growth rate of SP 500 earnings, vs that same expected rate one year prior.<\/p>\n<p>While Thomson Reuters gives the forward 4-quarter estimate each week, which for this quarter represents the sum of the bottom-up estimates from Q4 &#8217;17 through Q3 &#8217;18, it is up to me to track the numbers and compare them to prior year&#8217;s data.<\/p>\n<p>Today, November 3, 2017, the &#8220;forward 4-quarter&#8221; estimate of $142.16 grew 10.58% vs the same estimate on November 4th, 2016.<\/p>\n<p>That 10.58% is a new post-2008 record for the growth rate of the SP 500 forward estimate.<\/p>\n<p>In essence, what it tells us is that the &#8220;one-year forward&#8221; SP 500 earnings estimate is growing at a slowly accelerating pace.<\/p>\n<p>Here is how the forward estimate has tracked since late September &#8217;17 and its expected growth rate:<\/p>\n<ul>\n<li><em><strong>11\/3\/17:<\/strong><\/em> $142.16, +10.58%<\/li>\n<li><em><strong>10\/27\/17:<\/strong><\/em> $142.10, +10.18%<\/li>\n<li><em><strong>10\/20\/17:<\/strong><\/em> $142.25, +10.13%<\/li>\n<li><em><strong>10\/13\/17:<\/strong><\/em> $141.90, +9.81%<\/li>\n<li><em><strong>10\/6\/17:<\/strong> <\/em>$141.87, +9.52%<\/li>\n<li><em><strong>9\/29\/17:<\/strong><\/em> $137.62, +10%<\/li>\n<\/ul>\n<p>Source: Thomson Reuters data, and internal spreadsheet<\/p>\n<p>The point of this for readers is that &#8211; while earnings data isn&#8217;t a timing tool, or acts with precision relative to the market, usually when you get an increasing growth rate like we&#8217;ve seen, we should get &#8220;P.E expansion&#8221; in the SP 500.<\/p>\n<p>Except we haven&#8217;t.<\/p>\n<p>You never hear this from any of the CNBC pundits when talking about SP 500 valuation, but the SP 500&#8217;s forward P.E ratio today, is roughly the same as when we started 2017:<\/p>\n<ul>\n<li><em><strong>11\/3\/17:<\/strong><\/em> 18.2(x)<\/li>\n<li><em><strong>10\/6\/17:<\/strong> <\/em>18.0(x)<\/li>\n<li><em><strong>7\/7\/17:<\/strong><\/em> 17.4(x)<\/li>\n<li><em><strong>4\/7\/17:<\/strong> <\/em>17.4(x)<\/li>\n<li><em><strong>1\/6\/17:<\/strong><\/em> 17.15(x)<\/li>\n<\/ul>\n<p>Little surprises me about this data the last few years, but this surprised me: despite the SP 500 closing in on a 20% gain for 2017, the forward P.E ratio has expanded very little, almost nothing.<\/p>\n<p>What&#8217;s the conclusion we should draw from this ?<\/p>\n<p>We shouldn&#8217;t draw too much from any single data point but rapid &#8220;P.E expansion&#8221; is usually a market froth indicator and we&#8217;re certainly not seeing that now.<\/p>\n<p>More to come Saturday and Sunday.<\/p>\n<p>Thanks for reading.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The year-over-year growth rate of the SP 500 forward earnings estimate tracks the &#8220;expected&#8221; forward growth rate of SP 500&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":[140,91],"tags":[],"class_list":["post-7286","post","type-post","status-publish","format-standard","hentry","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\/7286","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=7286"}],"version-history":[{"count":1,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/7286\/revisions"}],"predecessor-version":[{"id":7287,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/7286\/revisions\/7287"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=7286"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=7286"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=7286"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}