{"id":9232,"date":"2019-08-09T20:53:29","date_gmt":"2019-08-09T20:53:29","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=9232"},"modified":"2019-08-09T20:53:29","modified_gmt":"2019-08-09T20:53:29","slug":"taking-a-slightly-longer-view-of-sp-500-earnings","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=9232","title":{"rendered":"Taking a Slightly Longer View of SP 500 Earnings"},"content":{"rendered":"<p>For 2019, the expected growth rate this calendar year for SP 500 earnings is just 2%. That&#8217;s pretty low.<\/p>\n<p>For 2020, as of this week, the &#8220;expected&#8221; SP 500 earnings growth rate has fallen to 11%, down from 12%, an expected growth rate that had held for 24 straight weeks. It was four weeks ago that the expected growth rate dropped from 12% to 11%.<\/p>\n<p>Here is the SP 500 data by the numbers: (Source: IBES by Refinitiv)<\/p>\n<ul>\n<li><em><strong>Fwd 4-qtr est:<\/strong><\/em> $172.26 vs $172.98 last week<\/li>\n<li><em><strong>PE ratio:<\/strong><\/em> 17x<\/li>\n<li><em><strong>PEG (fwd):<\/strong><\/em> 9.5x<\/li>\n<li><em><strong>PEG (TTM)<\/strong><\/em>: 3.5x<\/li>\n<li><em><strong>SP 500 earnings yield:<\/strong><\/em> 5.90% this week, versus 5.90% last week<\/li>\n<li><em><strong>Y\/Y growth of fwd est:<\/strong><\/em> +1.78% vs last week&#8217;s +2.21%<\/li>\n<li><em><strong>Y\/Y growth of TTM est:<\/strong><\/em> +4.88% vs last week&#8217;s 5.37%<\/li>\n<\/ul>\n<p><em><strong>Summary \/ conclusion: <\/strong><\/em>In 2018, excluding the TCJA impact on SP 500 earnings, organic SP 500 earnings growth per Factset (and John Butter does a great job) was 14% per their Earnings Insight missive published weekly. This year the expected 2019 RPS growth rate is 2%, which just like retailers that negan to measure 2-year comp&#8217;s the average SP 500 earnings growth will be around 7% &#8211; 8% for calendar 2018 and 2019.<\/p>\n<p>Do we get 11% &#8211; 12% next year for the SP 500 ?<\/p>\n<p>If full tariff&#8217;s get instituted, my guess is no. That 2019 calendar growth estimate for the SP 500 will likely come down.<\/p>\n<p>Note the &#8220;forward 4-quarter&#8221; expected growth estimate for the SP 500 which would include 3 &#8217;19 through Q2 &#8217;20 is just 1.78% today. That&#8217;s low &#8211; as low as the forward estimate was in early 2016. ( A year ago the &#8220;forward 4-quarter estimate&#8221; on August 10, 2018 was $169. There has been little &#8220;expectation&#8221; growth in analyst numbers the last 52 weeks.)<\/p>\n<p>Perhaps the next project is to compare what the &#8220;forward 4-quarter estimate&#8221; expected for a particular period and then compare it to the actual 4-quarter trailing earnings results.<\/p>\n<p>Personally, I still put a lot of weight on the SP 500 earnings yield and it continues to hover around 5%, which would assume a 20x forward multiple.<\/p>\n<p>(On a side note, a few metrics have been added for readers. I just don&#8217;t know that the PEG (PE-to-growth) ratio tells us much. It was below 1x in 2018 thanks to the bump from tax cuts and the SP 500 fell 4% on the year. The next metric that could be added will be an SP 500 earnings yield that is both forward and trailing. Still, i dont know that any investor puts any weight on trailing estimates or any &#8220;trailing metric&#8221; for that matter. As 2018 showed, you better be looking out at least 12 months ahead and that&#8217;s always a cloudier view.)<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>For 2019, the expected growth rate this calendar year for SP 500 earnings is just 2%. That&#8217;s pretty low. For&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-9232","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\/9232","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=9232"}],"version-history":[{"count":2,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/9232\/revisions"}],"predecessor-version":[{"id":9234,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/9232\/revisions\/9234"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=9232"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=9232"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=9232"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}