S&P 500 Earnings Update: Forward Estimate Growth Now Over 20%
Brian Gilmartin | Feb 18, 2018 12:12AM ET
This link may be the best summary of this week’s earnings “action” but Factset notes pointedly that “A record number of S&P 500 companies are issuing positive EPS guidance for 2018”.
Here is the Thomson Reuters data (by the numbers) as of Friday, 2/16/18.
- Fwd 4-qtr est: $157.78
- P.E ratio: 17.4
- PEG ratio: 0.87x
- S&P 500 earnings yield: +5.75% vs last week’s 6.00%
- Year-over-year Growth of fwd est: now over 20% up from 11%, on December 22nd, the day the tax bill was signed.
(Source: Thomson Reuters I/B/E/S – all TR does is give the forward estimate, the rest is calculated on a spreadsheet.)
That is a big number, now over 20%, which means that the forward estimate today, of $157.78, is 20% higher than the forward estimate of $131.39 on 2/17/17 or 52 weeks ago.
Look at the PEG or “P-E to growth” ratio too – it has been under 1.0 now for the last two weeks, and was 1.0 three weeks ago.
There is no question that earnings fundamentals are healthy. Jeff Miller and I talked about how a $150 earnings print in 2018 would be strong, but we’ve now blown through that expected 2018 EPS estimate and I now believe that $160 might be possible this year.
The problem is the bond market: if the 10-year yield continues to rise, the S&P 500 will be like trying to push a beach ball under the water – the higher yields will keep a lid on equity returns until there is some sense the rate of acceleration is over.
The 10-year Treasury yield has risen from 2.40% as of 12/31/17 to 2.88% as of Friday’s close. That is almost a 50 basis point move on a 2.40% yield or roughly a 20% adjustment.
My own opinion is that the Treasury “issues” are just starting too. It is going to be a tough year for bond markets.
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