Ironic that the S&P 500 and the major equity indices are correcting – with the S&P 500 falling below its 5-day moving average this week – for the first time since the Presidential election, in front of what will likely be the strongest year-over-year quarter of earnings growth since early-to-mid 2014.
Thomson Reuters I/B/E/S data (by the numbers):
- Forward 4-quarter estimate: $135.18, up from last week’s $135.14 and again showing sequential strength
- P.E ratio: 17(x)
- PEG ratio: 2.0 (x)
- S&P 500 earnings yield: 5.80%, up from last week’s 5.74%
- Year-over-year growth of the forward estimate: 8.25%, down 1 basis point from last week’s 8.30%
Thomson Reuters published “This Week in Earnings” Thursday night given the Good Friday market holiday so we received the typical week-ending S&P 500 earnings data a day early.
With several of the big bank’s reporting their Q1 ’17 quarters before the open on Thursday, April 13th, the numbers look good and the Financial sector should see a steady-to-higher drift in Q1 ’17 earnings growth estimates into the next week or two.
Readers need to know that – even without any tax reform built into the S&P 500 earnings estimates – as of right now 2017 is expecting the strongest year of earnings growth for the benchmark since 2010’s 40% y.y growth rate, and that 40% was only because 2008 and 2009 were down 30% – 35% cumulatively.
The sector distortions caused by the Energy sector will dissipate with 2017 earnings and this should be a robust year for earnings growth.
Whether the S&P 500 P.E expands or contracts in the face of this, is another question.