{"id":7997,"date":"2018-08-10T23:30:57","date_gmt":"2018-08-10T23:30:57","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=7997"},"modified":"2018-08-11T20:43:43","modified_gmt":"2018-08-11T20:43:43","slug":"sp-500-earnings-growth-in-forward-estimate-continues-to-hit-all-time-highs","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=7997","title":{"rendered":"SP 500 Earnings: Growth in Forward Estimate Continues to Hit All-Time Highs"},"content":{"rendered":"<p>Here&#8217;s the data:<\/p>\n<ul>\n<li><em><strong>Fwd 4-qtr est:<\/strong><\/em> $169.25 vs last week&#8217;s $169.24<\/li>\n<li><em><strong>PE ratio:<\/strong><\/em> 16.7x<\/li>\n<li><em><strong>PEG ratio:<\/strong><\/em> 0.75x<\/li>\n<li><em><strong>SP 500 earnings yield:<\/strong><\/em> +5.97% vs last week&#8217;s +5.96%<\/li>\n<li><em><strong>Year-over-year growth of fwd estimate:<\/strong><\/em> +22.38% vs last week&#8217;s +22.27%<\/li>\n<\/ul>\n<p>(Source: Thomson Reuters IBES This Week in Earnings for fwd est, the rest of data is internal)<\/p>\n<p>When I started tracking the earnings data in the early 2000&#8217;s, it took about a year for me to realize, that the &#8220;rate of change&#8221; of the forward estimate needed to be tracked to understand how forward earnings were tracking relative to the estimates from one year ago.<\/p>\n<p>Tax reform really changed the dynamics of the forward estimate.<\/p>\n<p>For a long time &#8211; from 2012 through 2016, here is the progression of actual SP 500 earnings growth for those 5 years:<\/p>\n<ul>\n<li>2016: +1%<\/li>\n<li>2015: -1%<\/li>\n<li>2014: +8%<\/li>\n<li>2013: +6%<\/li>\n<li>2012: +6%<\/li>\n<\/ul>\n<p>This is a cumulative 20% return over 5 years or just 4% per year, average, even below the long-term average for the SP 500 of 7% going back to the 1940&#8217;s, and this was &#8220;post-2008&#8221;. (A lot happened during this 5 years, including the crude oil collapse, commodities got crushed, the banking system saw special fines and penalties from Justice for years, the London Whale hit JP Morgan, etc.)<\/p>\n<p>Here is the &#8220;year-over-year&#8221; growth in the forward estimate since July 1 &#8217;18:<\/p>\n<ul>\n<li><em><strong>8\/10\/18:<\/strong> <\/em>+22.38%<\/li>\n<li><em><strong>8\/3\/18:<\/strong><\/em> +22.27%<\/li>\n<li><em><strong>7\/27\/18:<\/strong><\/em> +22.23%<\/li>\n<li><em><strong>7\/20\/18:<\/strong><\/em> +21.48%<\/li>\n<li><em><strong>7\/13\/18<\/strong><\/em>: +21.14%<\/li>\n<li><strong>7\/6\/18:<\/strong> +20.85%<\/li>\n<li><em><strong>6\/29\/18:<\/strong><\/em> +21.84%<\/li>\n<\/ul>\n<p>To be frank with readers, I&#8217;m looking for reasons to be bearish, but every time the data is put up, underlying strength is seen.<\/p>\n<p>The forward estimate comprises Q3 &#8217;18 through Q2 &#8217;19 and thus half of 2019 is being incorporated in one data point.<\/p>\n<p>2018 is turning out to be a lot like 1994: 6 Fed rate increases, white-hot earnings growth where SP 500 earnings grew over 20%, and the SP 500 returned 1% on the year.<\/p>\n<p>The SP 500&#8217;s &#8220;forward-estimate&#8221; looks solid.<\/p>\n<p>The SP 500 &#8220;earnings yield&#8221; of 5.97% looks cheap too. Anytime the SP 500 has traded with a 6% earnings yield, it has paid to buy and hold.<\/p>\n<p>The SP 500 could use a good flush, but even sentiment is hardly wildly optimistic, using AAII&#8217;s 36.4% of those surveyed as being &#8220;bullish&#8221;, which per the Bespoke Report is still below the long-term average (i.e. a positive for those long the market).<\/p>\n<p>(Jeff Miller of www.dashofinisght.com) had a timely post this week, &#8220;The Calm Before the Storm).<\/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&#8217;s the data: Fwd 4-qtr est: $169.25 vs last week&#8217;s $169.24 PE ratio: 16.7x PEG ratio: 0.75x SP 500 earnings&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":[91],"tags":[],"class_list":["post-7997","post","type-post","status-publish","format-standard","hentry","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\/7997","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=7997"}],"version-history":[{"count":4,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/7997\/revisions"}],"predecessor-version":[{"id":8013,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/7997\/revisions\/8013"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=7997"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=7997"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=7997"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}