Last weekend, the updated earnings numbers from Thomson Reuters, “This Week in Earnings” were not published:
- Forward 4-quarter estimate: $125.63, and up from the prior week’s $121.78. The quarterly bump in the forward estimate came in just as expected.
- P.E ratio: 16.5(x)
- PEG ratio: still negative, ex-Energy, under 2(x)
- Earnings yield: 6.05%, the first time that the S&P 500 earnings yield has been over 6% since late January ’15.
- Y/Y growth rate of forward estimate: -3.94%
Analysis / conclusion: This Excel spreadsheet shows the recent earnings and revenue trends by sector for the S&P 500. It is still a work-in-progress but readers can see the heavy drag that Energy is still exerting on the overall index, thanks to the dramatic decline in earnings growth for one sector.
Here are a couple of other thoughts I’ll leave readers with in terms of some of the trends:
- Healthcare is still king, with Gilead (NASDAQ:GILD) and Amgen (NASDAQ:AMGN) being two of the heaviest weights in the sector, representing 2.4% of the sector, after Johnson & Johnson (NYSE:JNJ) and Pfizer's (NYSE:PFE) weighting of 2.9%. Healthcare earnings growth for Q1 ’15 was expected to be +7.2% the first week of April ’15 but ended up at +17.6%. Healthcare earnings are expected to increase just +4.1% per the current estimates on the above spreadsheet. Let’s keep an eye on how that changes through the quarter.
- Financials are slated to have another decent quarter with +14% – 15% earnings growth. This sector, to me, represents a solid, lower-risk, lower-reward opportunity. Note that Financials revenue growth the last 3-4 years.(Long the big banks.)
- Basic Materials beginning the 2nd quarter at +4.9% isn’t too bad. Unfortunately, Basic Mat is just 3% of the S&P 500. (Long Alcoa (NYSE:AA), US Steel Corporation (NYSE:X))
- Technology is still heavily dependent on Apple (NASDAQ:AAPL). This is Apple’s fiscal Q3 ’15 and a lot of it could be Apple Watch. Expect an uneventful quarter from Apple. (Long AAPL)
- Industrials: General Electric (NYSE:GE) is still the heaviest weight in the sector at 0.8%, but the airlines have dragged down numbers for the last 3 months. GE, Boeing (NYSE:BA) and 3M (NYSE:MMM) are the top 3 stocks in terms of earnings weight within Industrials, at 0.8%, 0.5% and 0.5% respectively. (Long GE, BA)
- Energy – I do think Energy remains “lower for longer” but I want to see how Q2 ’16 earnings growth estimates for the sector unfold.
Financials and Technology are still over 40% of the S&P 500 by market cap, and given the very reasonable valuations in both sectors, it is tough to see how the S&P 500 could be in for a longer-term bear market than we saw in the 2000 – 2009 decade. but the fact is this slow growth could go on for quite a lot longer.
Greece is a headline distraction, and like Ukraine, hopefully it will fade shortly.
Expect another solid quarter for Q2 ’15 financial results.