A focus on the Health Care sector and historical revenue and earnings growth will come this weekend. The sector has been absolutely crushed the last few weeks.
S&P 500 Earnings (by the numbers): Source: I/B/E/S by Refinitiv
- Fwd 4-Q est: $172.14 vs last week’s $173.14
- PE ratio: 16.9x
- PEG ratio: 2.76x
- S&P 500 earnings yield: 5.95% vs last week’s 5.93%
- Year-over-year growth of fwd est: +6.17% vs last week’s 6.37%
(One clarification for readers: the “forward 4-quarter estimate” is now Q2 ’19 through Q1 ’20 as defined by IBES by Refinitiv. The 4-quarter trailing actual is now q2 ’18 through Q1 ’19. The calendar ’18 four-quarter trailing actual earnings couldn’t be used since it would leave a gap between the 4-quarter forward, vs 4-quarter trailing. Hope this makes sense.)
Is the Turn Starting?
This graphical portrayal of the total dollar earnings tracked by IBES is usually on page 1 of “This Week in Earnings.”
Financials Had a Good Week:
- Schwab (NYSE:SCHW): +2.91%
- JP Morgan (NYSE:JPM) : +6.81%
- Financial Select Sector SPDR (NYSE:XLF): +2.59%
- SPDR S&P Regional Banking (NYSE:KRE): +1.06%
- CME Group (NASDAQ:CME): +3.41%
- Goldman Sachs (NYSE:GS): +1.52%
- S&P 500: +0.58%
Nice bounce in Financials this past week, as the sector narrowed the under-performance gap with the S&P 500. With the 10-year Treasury yield now above 2.55% as the long end of the Treasury curve rises in yield, the fears of yield curve inversion should dissipate.
This was a timely blog post from last week.
Summary / conclusion: 155 S&P 500 companies report their March ’19 quarterly earnings in the coming week, thus by the end of next week, almost half the S&P 500 will have reported quarterly results. Using the standard “upside surprise” factor to quarterly earnings, Q1 ’19 S&P 500 earnings should end the reporting period with actual y/y growth around 3%-4%.
The problem is that there is still little upside momentum in the expected growth rates for the “out” quarters like Q2, Q3 and Q4, ’19.
Here are the current worries to the US stock market today:
1. Low VIX;
2. Seems like there is little enthusiasm for the S&P 500 to take out the September 18 highs at 2,940- 2,942;
3. The S&P 500 is overbought;
BUT earnings estimate revisions are still getting “less worse”:
The far right columns begins on February 1, 2019. The near column is as of 4/19/19.
Whatever the problem within the S&P 500 today, I don't think it is earnings-related, That was the last two quarters.