By the numbers (Source: Thomson Reuters, “This Week in Earnings”):
- Forward 4-quarter estimate: $122.09, unchanged from last week
- P/E ratio: 17.3(x)
- PEG ratio: (21), or excluding Energy roughly 2(x)
- S&P 500 earnings yield: 5.79%, up from 5.74% last week.
- Y/Y growth rate of forward estimate: -0.79% (still negative for last 4 weeks, but not deteriorating)
Analysis / conclusion: At some point, the y/y growth rate of the forward estimate needs to turn positive. It really isn’t getting worse, but it isn’t getting better either. Q1 ’15 earnings are essentially over as 491 of the S&P 500 have reported Q1 ’15 earnings per Thomson Reuters.
While the economic data continues to be relatively soft, during June we will hear from companies with a May ’15 quarter end. Some retail, some technology, some Transports, like Fed-Ex (NYSE:FDX), will report their May ’15 quarter in the next few weeks. (Long some retail, tech and FDX).
Some of the retail damage is shocking: there is a death match occurring between Wal-Mart (NYSE:WMT) and Amazon (NASDAQ:AMZN) with the beneficiary being the US consumer, and the “victims” being any general merchandise retailer that cannot screw their cost structure down to a level that sustains a profit margin worthy of investment. Apparel, general merchandise, groceries – all the margin is being squeezed out of these segments gradually.
Looking at what is happening between WMT and AMZN, is there any wonder consumer inflation is so low ? (Long both stocks.)