{"id":7743,"date":"2018-05-05T12:14:53","date_gmt":"2018-05-05T12:14:53","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=7743"},"modified":"2018-05-06T13:00:49","modified_gmt":"2018-05-06T13:00:49","slug":"sp-500-earnings-update-sp-500-earnings-yield-at-4-week-high","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=7743","title":{"rendered":"SP 500 Earnings Update: SP 500 Earnings Yield at 4-week High"},"content":{"rendered":"<p>Here are the last 3 weeks closing value for the SP 500:<\/p>\n<ul>\n<li><em><strong>05\/4\/18:<\/strong><\/em> 2,663.42<\/li>\n<li><em><strong>4\/27\/18:<\/strong><\/em> 2,669.91<\/li>\n<li><em><strong>4\/20\/18:<\/strong><\/em> 2,670.14<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li>Here is the last 3 weeks closing yield on the 10-year Treasury:<\/li>\n<li><em><strong>05\/4\/18:<\/strong><\/em> 2.945%<\/li>\n<li><em><strong>4\/27\/18:<\/strong><\/em> 2.95%<\/li>\n<li><em><strong>4\/20\/18:<\/strong><\/em> 2.95%<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<figure id=\"attachment_7746\" aria-describedby=\"caption-attachment-7746\" style=\"width: 300px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/fundamentalis.com\/?attachment_id=7746\" rel=\"attachment wp-att-7746\"><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-7746\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/TRnetincomevsEPS5418-300x181.png\" alt=\"\" width=\"300\" height=\"181\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/TRnetincomevsEPS5418-300x181.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/TRnetincomevsEPS5418.png 708w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><figcaption id=\"caption-attachment-7746\" class=\"wp-caption-text\">Click on chart to enlarge<\/figcaption><\/figure>\n<p>&nbsp;<\/p>\n<p>Chart explanation: David Aurelio put a quick chart \/ table for me showing the difference between year-over-year (y\/y) EPS growth versus y\/y net income growth.<\/p>\n<p>What&#8217;s the important difference ?<\/p>\n<p>The difference between net income growth and EPS growth shows the impact of share repurchases on the index.<\/p>\n<p>Looking at the above table, Q1 &#8217;17 was the biggest share repurchase attribution to the overall SP 500 where net income growth was 11.9%, versus the SP 500&#8217;s EPS growth of 15.3%. Share repurchases added 3.4% of EPS growth in Q1 &#8217;17.<\/p>\n<p>In Q1 &#8217;18 the growth difference in EPS vs net income is just 150 bp&#8217;s or 1,5%.<\/p>\n<p>The conclusion to be drawn is that &#8211; if you study the table &#8211; share repurchases aren&#8217;t having a big impact on y\/y EPS growth despite Apple&#8217;s monster $100 bl repurchase (or planned repurchase).<\/p>\n<p>&nbsp;<\/p>\n<figure id=\"attachment_7747\" aria-describedby=\"caption-attachment-7747\" style=\"width: 300px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/fundamentalis.com\/?attachment_id=7747\" rel=\"attachment wp-att-7747\"><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-7747\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/TRebitvspretax5418-300x101.png\" alt=\"\" width=\"300\" height=\"101\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/TRebitvspretax5418-300x101.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/TRebitvspretax5418.png 619w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><figcaption id=\"caption-attachment-7747\" class=\"wp-caption-text\">Click on chart to enlarge<\/figcaption><\/figure>\n<p>&nbsp;<\/p>\n<p>This table was a little surprising: despite faster revenue growth over the last 8 quarters, &#8220;pre-tax&#8221; profit has changed little within the SP 500. David Aurelio&#8217;s point was that pre-tax profit growth is strong, even without the tax cuts. Do I like tax cuts ? Absolutely &#8211; living in Chicago and Illinois, I&#8217;d much rather have tax cuts, than not have tax cuts, but so far &#8220;pre-tax profit growth&#8221; has increased just 1% or 100 basis points year-over-year.<\/p>\n<p><em><strong>Here is the weekly SP 500 earnings update (by the numbers):<\/strong><\/em><\/p>\n<ul>\n<li><em><strong>Fwd 4-qtr est:<\/strong><\/em> $163.10 vs $162.43<\/li>\n<li><em><strong>P<\/strong><strong>E ratio:<\/strong> <\/em>16.3x<\/li>\n<li><em><strong>PEG ratio:<\/strong><\/em> 0.79x<\/li>\n<li><em><strong>SP 500 earnings yield:<\/strong><\/em> 6.12% vs last week&#8217;s 6.08%<\/li>\n<li><em><strong>Year-over-year gro of fwd est:<\/strong><\/em> +20.76% vs 20.29% last week<\/li>\n<\/ul>\n<p>(Source: Thomson Reuters IBES This Week in Earnings, 5\/4\/18)<\/p>\n<p><em><strong>Conclusion:<\/strong><\/em><\/p>\n<p>The SP 500 earnings yield is at a 4-week high and while its not a timing tool, it speaks to the relative attractiveness of the benchmark&#8217;s value with a yield still over 6%.<\/p>\n<p>The SP 500 has tested its 200-day moving average 3 times, successfully, but cannot make headway.<\/p>\n<p>Here is why Apple&#8217;s overweight position was reduced to an underweight position in client accounts (<a href=\"https:\/\/fundamentalis.com\/?p=7738\">here)<\/a>.<\/p>\n<p>The last 2 non-farm payroll reports have been weak, and the 10 and 30-year Treasuries have rallied little or not at all.<\/p>\n<p>Thanks for reading.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Here are the last 3 weeks closing value for the SP 500: 05\/4\/18: 2,663.42 4\/27\/18: 2,669.91 4\/20\/18: 2,670.14 &nbsp; Here&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":[90,91],"tags":[],"class_list":["post-7743","post","type-post","status-publish","format-standard","hentry","category-apple-aapl","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\/7743","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=7743"}],"version-history":[{"count":10,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/7743\/revisions"}],"predecessor-version":[{"id":7759,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/7743\/revisions\/7759"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=7743"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=7743"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=7743"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}