An oft-used analogy for many circumstances, “Waiting For Godot” seems the perfect analogy for the anticipated faster earnings growth from the S&P 500, which we have yet to see. My apologies to all, since I haven’t read the play since high school or college English class.
However, looking at the numbers for Q4 ’16 and 2017, I remain a firm believer that S&P 500 earnings growth is poised to accelerate.
Q4 ’16 sector earnings estimates per the Thomson Data looks particularly intriguing. Here are the sectors ranked by year-over-year earnings growth, and more importantly the change since April 1 ’16:
- Basic Mat: +24%, vs +22% on April 1 ’16
- Financials: +17.2% vs +21.7% as of April 1 ’16
- Utilities: +15.6%, vs +8.9% as of April 1 ’16
- Energy: +12.4% vs +11.1% as of April 1 ’16
- Cons Disc: +10.6% vs. +10.4% as of April 1 ’16
- Cons Spls: +9.9% vs +8.6% as of April 1 ’16
- Health Care: +9.8% vs +10.2% as of April 1 ’16
- Technology: +4.2% vs +6.7% as of April 1 ’16
- Industrials: +3.9% vs +4.4% as of April 1 ’16
- Telecom: +2.3%, vs +2.5% as of April 1 ’16
- S&P 500: +9.5% vs +10.6% as of April 1 ’16
What is unusual about these numbers is something that has been explained on this blog in the past and Cam Hui, author of the Humble Student blog explained this weekend here. Analyst revisions by far and away are typically negative until the quarter starts, and then the revisions are uniformly positive.
The point is that, for Energy, Basic Materials and the Consumer Sectors, to see upward revisions now—well in advance of the quarter—and to see expected earnings growth above estimates as we get closer to reporting dates, is very important and relevant info.
For 2017, as it stands today, five of the 10 S&P 500 sectors are seeing upward revisions to earnings growth already, and we are still 6 months away from the start of 2017.
What I’ll be looking for as we move through Q2 ’16 earnings season is to see Q4 ’16 continue to hold its current 9% growth rate also watch and see if the two largest S&P 500 sectors – Financials and Technology – start to see better revisions.
Readers will get another post tomorrow. Lots of other parties starting to comment on S&P 500 earnings. We’ll have a look at some of the articles and some Thomson earnings data.