Using Factset’s Weekly Earnings Insight, Ex-Energy, S&P 500 earnings are +5%-6% for Q3 ’15, probably slightly slower than the first and 2nd quarters of 2015.
Ex-Energy, S&P 500 revenue has grown +2.2% y/y, with retail or Consumer Discretionary set to report in November ’15. Financials, Technology and Energy have pretty much all reported Q3 ’15 earnings.
A couple of statistics jumped out during the typical Saturday morning S&P 500 earnings reads:
- Per Factset, the revision for Q4 ’15’s bottom-up estimate is -2.4%, lower than 1-year average but higher than the 5 and 10-year averages. In English, what that means is, looking ahead to Q4 ’15, the bottom up estimate has been revised 2.4% lower since October 1 ’15, and looks to be in line with the longer-term averages, i.e. investors are seeing the normal rate of negative revisions for the next forward quarter (or Q4 ’15) as it stands today.
- Also per Factset, Healthcare has the highest number of companies beating EPS consensus at 86%, as well the highest percentage of companies beating revenue consensus at 69%.
- Per Thomson Reuters, S&P 500 earnings are expected to grow at 6.3% in Q3 ’15, which Thomson calls “the lowest Ex-Energy growth rate in over two years”. ( Readers need to see the data on this – give me a few days.)
- Per Bespoke, in terms of the market action since the September ’15 lows, the biggest surprise I see is that “international companies” or companies with greater than 50% of their revenue from outside the US, “have outperformed domestic names significantly” during this rally.
- Bullish sentiment has suddenly spiked higher, and it has remained stubbornly below average for a while. Part of the spike could be due to the plethora of articles about the S&P 500’s “seasonal” returns beginning November 1 of each year.
Analysis / conclusion: Core S&P 500 earnings growth Ex-Energy is still growing at a mid-single-digit pace, but slowing somewhat. What is the catalyst that will accelerate S&P 500 earnings growth ? Hard to say. I think it will be S&P 500 corporate boards and leadership growing more positive about the future. There is no question that S&P 500 earnings growth is locked in this “slow, stable, mid to high-single-digit, year-over-year growth” range, quarter-in, quarter out, which despite the headlines and negative earnings pessimism, continues unabated.
One statistic readers might like: updating my Apple (O:AAPL) spreadsheet with current EPS and revenue Street consensus after Apple’s fiscal Q4 ’15 earnings report, the “average” EPS and revenue growth rate over the next 3 years (fiscal ’16-’18) is 9% and 5% respectively. Expectations for Apple’s forward growth have been ratcheted WAY down, which is highly unusual for a leadership stock like that. AAPL may now be a “growth cyclical” similar to that of the tech giants of the late 1990’s.
Thomson Reuters data for S&P 500 earnings (By the Numbers):
- Forward 4-quarter estimate for S&P 500: $124.32
- Forward estimate of P.E ratio: 16.7(x)
- PEG ratio: still negative given y/y growth rate
- S&P 500 earnings yield: 5.98%, versus last week’s 5.99%
- Forward estimate y/y growth rate: -2.09% vs last week’s -1.88%. The expectation is that this will turn positive in November ’15. Not yet though.
The PEG ratio using core S&P 500 earnings growth is closer to 2.5(x).
Despite the bleating of mainstream media, S&P 500 earnings are rolling along about as usual, but the year-over-year growth rate is trending slightly lower.
The S&P 500 is now overbought. A 200 point down day for the Dow 30 would take a lot of fluff out of the market.