{"id":8490,"date":"2018-12-08T15:45:26","date_gmt":"2018-12-08T15:45:26","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=8490"},"modified":"2018-12-08T15:45:26","modified_gmt":"2018-12-08T15:45:26","slug":"looking-at-sp-500-bottom-up-estimate-revisions","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=8490","title":{"rendered":"Looking at SP 500 Bottom-up Estimate Revisions"},"content":{"rendered":"<p><a href=\"https:\/\/fundamentalis.com\/?attachment_id=8491\" rel=\"attachment wp-att-8491\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-8491\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/SP500estrevisions1282018-300x163.png\" alt=\"\" width=\"300\" height=\"163\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/SP500estrevisions1282018-300x163.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/SP500estrevisions1282018-768x418.png 768w, https:\/\/fundamentalis.com\/wp-content\/uploads\/SP500estrevisions1282018-1024x557.png 1024w, https:\/\/fundamentalis.com\/wp-content\/uploads\/SP500estrevisions1282018.png 1340w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<ul>\n<li>Using IBES by Refinitiv data, the weekly changes in bottom-up earnings estimates for companies within the SP 500 are monitored for estimate changes.<\/li>\n<li>The spreadsheet tracks the IBES data by week so that it can be monitored for changes in overall trends within the SP 500&#8217;s 11 sectors.<\/li>\n<li>The areas of heavy blocking represent the heaviest reporting period by quarterly earnings season for Q1, Q2, and Q3 of 2018.<\/li>\n<\/ul>\n<p><em><strong>A couple points of interest:<\/strong><\/em><\/p>\n<p>1.) The number of positive revisions or &#8220;peak positive&#8221; revisions if you scan the highlighted areas have slowly declined in 2018, but not alarmingly so. Note the period from April 20 to May 18, 2018: &#8220;peak positive&#8221; revisions were 69% of the total versus 65% in July &#8211; August &#8217;18 (2nd quarter earnings) and 62% in October &#8211; November, or 3rd quarter earnings.<\/p>\n<p>2.) This data is supported by the absolute number positive revisions in each quarter, with Q1 &#8217;18 seeing a maximum of 1,791 positive revisions, while Q2 &#8217;18 saw peak of 1,625, and Q3 &#8217;18 saw a peak of 1,408.<\/p>\n<p>The key question is, &#8220;Does this revision data signal a change in trend for SP 500 earnings ?&#8221; and my own answer is &#8220;not yet&#8221;.<\/p>\n<p>LizAnn Sonders, Schwab&#8217;s strategist, and Bob Doll of Nuveen, noted early on a weakening of the earnings numbers and it has shown up in the &#8220;forward 4-quarter growth rate&#8221; but monitoring the 2019 SP 500 calendar estimate for the last 6 months, <a href=\"https:\/\/fundamentalis.com\/?p=8444\">2019 was always expected to be slower<\/a>, but the fact is 2019 SP 500 EPS estimate has slowed to 8% y\/y growth, from 10% expected growth just 2 months ago.<\/p>\n<p>Again, the important question is, &#8220;Does this represent a material and relevant change in trend in the forward expectations of SP 500 earnings ?&#8221;<\/p>\n<p>And my answer is &#8211; and it could be wrong &#8211; &#8220;not yet&#8221; or to put it more bluntly, &#8220;no&#8221;.<\/p>\n<figure id=\"attachment_8493\" aria-describedby=\"caption-attachment-8493\" style=\"width: 294px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/fundamentalis.com\/?attachment_id=8493\" rel=\"attachment wp-att-8493\"><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-8493\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/estimizesp500revisions12818-294x300.png\" alt=\"\" width=\"294\" height=\"300\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/estimizesp500revisions12818-294x300.png 294w, https:\/\/fundamentalis.com\/wp-content\/uploads\/estimizesp500revisions12818.png 646w\" sizes=\"auto, (max-width: 294px) 100vw, 294px\" \/><\/a><figcaption id=\"caption-attachment-8493\" class=\"wp-caption-text\">Click to enlarge \/ enhance<\/figcaption><\/figure>\n<p>&nbsp;<\/p>\n<p>One last graph that should be posted is good data by Estimize, the Leigh Drogen-founded earnings analysis firm that does a nice job of tracking corporate earnings. The above graph, which is received every two weeks from Estimize shows revisions by sector, which I think is important data. Not being a fan of &#8220;crowd-funding&#8221; analysis, I do think earnings revisions by sector is an important indicator of relative value within the SP 500.<\/p>\n<p>This graph still shows the old Telco sector rather than the &#8220;new&#8221; Communications Services sector, but at least according to the Estimize data from 11\/26\/19, positive revisions still outnumber negative revisions for the sector with the biggest impact on the SP 500&#8217;s market cap including Tech, Health Care, Financials, and Consumer Discretionary.<\/p>\n<p><em><strong>Summary \/ Conclusion: <\/strong><\/em>Readers should take all opinions about forward looking expectations of SP 500 earnings with a grain of salt, but this blog has always tried to give readers incremental information about what is a very important aspect to the stock market: expectations around forward earnings for the SP 500, and how those estimates have changed. The inclusion of the Estimize graph is to give a shout out to the company, since I&#8217;ve asked IBES by Refinitiv if they have revisions data by sector, and Refinitiv apparently does not.<\/p>\n<p>One thing for readers to be alert to as we head into the last few weeks of December and early January &#8217;19 is material earnings pre-announcements by any sector leader. In September of 2000, when the Tech and large-cap growth bubble started to unravel, Intel led off the unraveling with a pre-announcement of an earnings and revenue miss around slowing PC growth.<\/p>\n<p>Apple would be the most likely candidate for a negative preannouncement with the stock down 27% of its all-time-high of $230. Facebook too. &#8220;New Tech&#8221; is at greater risk in my opinion than &#8220;Old Tech&#8221; or the original growth babies of the 1990&#8217;s i.e Microsoft, Cisco, Intel, etc. (Long all mentioned.)<\/p>\n<p>With <a href=\"https:\/\/fundamentalis.com\/?p=8487\">last night&#8217;s blog post<\/a>, the goal was to show that this is still just a &#8220;normal&#8221; correction for the SP 500.<\/p>\n<p>Thanks for reading. More to come tomorrow.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Using IBES by Refinitiv data, the weekly changes in bottom-up earnings estimates for companies within the SP 500 are monitored&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":[210],"tags":[],"class_list":["post-8490","post","type-post","status-publish","format-standard","hentry","category-sp-500-estimate-revision-data"],"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\/8490","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=8490"}],"version-history":[{"count":3,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/8490\/revisions"}],"predecessor-version":[{"id":8495,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/8490\/revisions\/8495"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=8490"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=8490"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=8490"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}