The big data point that stuck out this week was the all-important, year-over-year growth rate of the “forward 4-Quarter” estimate. We’ll walk through the numbers in a second, but the other aspect of the numbers that jumped out was that the bottom-up calendar year estimates for 2017 and 2018 were revised higher for the 2nd consecutive week.
Geeky stuff and navel gazing indeed, but the data pattern and changes therein is what gets my attention.
Thomson Reuters data by the numbers:
- Forward 4-quarter estimate: $128.56 vs last week’s $128.47
- P/E ratio: 17.2(x)
- PEG ratio: 4.2(x)
- S&P 500 earnings yield: 5.81% vs last week’s 5.89%
- Year-over-year growth rate of the forward estimate: +4.03%, vs last week’s +3.80%, and the highest growth rate since mid-January ’15 or 22 months ago
Thomson Reuters notes that “ex-Energy” the S&P 500 grew earnings in Q3 ’16 +7.9%. Factset’s “Ex-Energy” growth is +6.5% for earnings and +4.5% for revenue.
The third and 4th quarters of 2016 look to be decent, healthy quarters of earnings growth, even before the President-elect Trump and the 2017 Congressional agenda is being considered.
The fact that the Street is finally taking up the “forward 4-quarter” EPS estimate for the S&P 500 is likely anticipating what is to come in 2017, but even with today’s value of $128.56, it is still “light” considering the personal and corporate tax reform being discussed.
My opinion is that Q4 ’16 earnings and revenue growth just isn’t that important today, given what could come down the pike in 2017, both good and bad.
We get the OPEC news this coming week, as well as the November ’16 nonfarm payroll report, next Friday, December 2nd ’16.
The survey period for the payroll report is – from what I recall reading over the years – from the first to the 10th of every month, so the Presidential election this year fell very close to the end of the reporting period.
Briefing.com expected “net new jobs” added to the economy in November ’16 is 180,000, with the private sector expected to add 170,000.
As has been written here for years, the two largest sector overweights presently for clients are Technology and Financials, with some exceptions amongst some accounts. Technology has stopped rallying in the last few weeks, while Financials have assumed the market leadership mantle.