{"id":8444,"date":"2018-11-23T21:25:19","date_gmt":"2018-11-23T21:25:19","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=8444"},"modified":"2018-11-24T21:37:40","modified_gmt":"2018-11-24T21:37:40","slug":"sp-500-earnings-update-street-still-expecting-9-10-sp-500-earnings-growth-in-2019","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=8444","title":{"rendered":"SP 500 Earnings Update: Street Still Expecting 9% &#8211; 10% SP 500 Earnings Growth in 2019"},"content":{"rendered":"<p>With the 3rd quarter in the books for the most part, the 28% y\/y earnings growth for the SP 500 (per IBES by Refinitiv) will be strongest rate of earnings growth for the key benchmark since &#8211; well &#8211; the spreadsheet goes all the way back to the 4th quarter of 2011 and nothing comes close to 2018&#8217;s SP 500 earnings growth.<\/p>\n<p>At the start of the quarter, IBES by Refinitiv was expecting 21.6% SP 500 earnings growth on 7.5% revenue growth, and now &#8220;actual&#8221; SP 500 earnings with just 5 weeks left to go in the quarter and 484 SP 500 companies having reported, is +28.2% on 8.5% revenue growth.<\/p>\n<p>As some have suggested Q3 &#8217;18 is probably the peak in &#8220;year-over-year growth&#8221; in SP 500 earnings, but absolute earnings (actual dollar estimates) will continue to work higher.<\/p>\n<p><strong><em>Street consensus for 2019 SP 500 earnings growth:\u00a0<\/em><\/strong><\/p>\n<ul>\n<li><em><strong>11\/23\/2018:<\/strong><\/em> +9%<\/li>\n<li><em><strong>9\/28\/2018:<\/strong> <\/em>+10%<\/li>\n<li><em><strong>6\/29\/2018:<\/strong><\/em> +10%<\/li>\n<li><em><strong>3\/30\/18:<\/strong><\/em> +10%<\/li>\n<li><em><strong>12\/29\/17:<\/strong><\/em> +10%<\/li>\n<\/ul>\n<p>The consensus for 2019 has changed little in the last 45 weeks per the data tracked weekly.<\/p>\n<p>SP 500 Weekly Earnings Update: (IBES by Refinitiv)<\/p>\n<ul>\n<li><em><strong>Fwd 4-qtr est:<\/strong><\/em> $171.28 down from last week&#8217;s $171.79<\/li>\n<li><em><strong>4-qtr trail est:<\/strong><\/em> $157.78 vs last week&#8217;s $157.73<\/li>\n<li><em><strong>PE ratio:<\/strong><\/em> 15.3x<\/li>\n<li><em><strong>PEG ratio:<\/strong><\/em>\u00a01.80x<\/li>\n<li><em><strong>SP 500 earnings yield:<\/strong><\/em> 6.5% the highest yield since late October&#8217;s 6.52%<\/li>\n<li><strong><em>Year-over-year growth of fwd est:<\/em><\/strong> +8.6%<\/li>\n<\/ul>\n<p><em><strong>Summary \/ conclusion:<\/strong><\/em> observant readers will note the addition of a new metric for the growth rate of the forward estimate, which now uses the &#8220;4-quarter trailing&#8221; EPS number as the base for the growth rate, rather than the prior years forward 4-quarter estimate. One of the aspects to tracking data i have always been uncomfortable with is comparing an &#8220;estimate&#8221; to an earlier &#8220;estimate&#8221; and then noting the growth difference. Even with 4-quarter trailing data though, that still happens but to a smaller degree. For instance the 4-quarter trailing EPS estimate is the sum of Q4 &#8217;17 through Q3 &#8217;18, and with Q3 &#8217;18 still reporting results that quarter&#8217;s estimate will change every week until 12\/31\/18.<\/p>\n<p>What this change will prevent is sharp changes in growth rates at the beginning of each quarter, since the calculation will now have a rolling aspect to the forward estimate. For example, the full-year 2018 EPS estimated earnings growth has been 22% &#8211; 25% for since early January, 2018. 2019&#8217;s estimates earnings growth is what is listed above in the first bullet points.<\/p>\n<p>Comparing the forward estimate today to a forward estimate 52-weeks prior is a little like calculating convexity on a bond or bond portfolio: the rate of change is being measured rather than an absolute change of the estimate.<\/p>\n<p>The &#8220;4-quarter&#8221; trailing&#8221; versus the &#8220;forward 4-quarter&#8221; estimate will reduce some of the sharp quarterly growth rate changes and provide readers a smoothed or more realistic growth rate looking forward. (This data was always captured in the annual EPS estimates, as noted above.)<\/p>\n<p>What&#8217;s remarkable about the earnings data for Q4 &#8217;18 is that the Energy estimated earnings growth rate has risen since October 1 &#8217;18.<\/p>\n<p>Out with more over the weekend.<\/p>\n<p>Thanks for reading. Hope this post wasn&#8217;t too technical.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>With the 3rd quarter in the books for the most part, the 28% y\/y earnings growth for the 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":[213,1],"tags":[],"class_list":["post-8444","post","type-post","status-publish","format-standard","hentry","category-2019-sp-500-earnings","category-uncategorized"],"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\/8444","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=8444"}],"version-history":[{"count":4,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/8444\/revisions"}],"predecessor-version":[{"id":8458,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/8444\/revisions\/8458"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=8444"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=8444"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=8444"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}