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Silverblatt’s Earnings Work, The Fed Model, And The S&P 500 Rally

Published 03/17/2015, 01:15 AM
Updated 07/09/2023, 06:31 AM

After forgetting to put the weekly earnings metrics into the Weekly Update over the weekend, here are the weekly metrics and some additional thoughts:

Forward 4-quarter estimate: $119.78, down slightly from the prior week’s $119.87

  • P.E ratio: 17(x)
  • PEG ratio: 20.8(x)
  • Earnings Yield: 5.83%

Year-over-year growth rate of forward estimate: +0.82%, the lowest rate of growth since August 3rd, 2012, when the growth rate bottomed at 1.03%.

One of the goals I have for my blog is to become an “earnings data aggregator”, where I mix and blend various earnings data sources for readers, and provide perspective on the data and highlight aspects of various services and what they do well, and where – in my opinion – they add value. Factset puts out that forward revenue data, which I think is valuable to track, which Thomson does not publish.

I've linked to Standard & Poor’s, Howard Silverblatt’s weekly earnings work: SP500_EPS_DIV_ta2.xls (silverblatt). This is a great blog: on the first page, i.e. “estimates and PE’s” note the PEG of the Energy sector, which is distorting the PEG ratio listed above, as are the Utilities to a smaller extent. There's only question I have: whether Howard’s “operating earnings contribution” for the Energy sector is actually the 4% – 5% that Howard is using, or the 10% that I have been guesstimating for 2015 S&P 500 growth rates.

As you look at Howard’s spreadsheet, check the S&P 500 dividend yield. The S&P 500 dividend yield is STILL very close to the U.S. 10-Year Treasury yield, even after last night’s close (the S&P 500 rose 27.79 yesterday, to close at 2,081).

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The Fed Model, which tracks the S&P 500 Earnings Yield (see above) versus the 10-year Treasury still leaves stocks as a screaming buy versus the 10-year Treasury, given the 5.83% versus 2.10% spread. What the Fed Model is telling us, whether you believe it or not, is that interest rates could rise substantially, and not put too much of a dent in the S&P 500 from a valuation perspective.

In 1997, when Greenspan first referenced the model in his speech, the 10-year Treasury was yielding about what the earnings yield is on the S&P 500 today (5.7%, 5.8%). And the S&P 500 earnings yield was near 2%, about where the 10-year Treasury is trading today. (Hmmm…)

Yesterday’s S&P 500 rally took the key benchmark back over the 50-day moving average. We get Oracle’s (NYSE:ORCL) earnings Tuesday night, Fed-Ex (NYSE:FDX) Wednesday morning, Lennar (NYSE:LEN), Tiffany (NYSE:TIF) and Nike (NYSE:NKE) later in the week.

The S&P 500 rallied yesterday even though crude oil fell – that hasn’t been the correlation the last 6 months.

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