90 Day Treadmill Final Update for Q4 2012 …aka Earnings Season

Often times our posts and articles act as a diary for us as we are able to clearly look back in the future and see what the expectations and results were at a point and time.  Just as that old saying goes “An analysts, economist or forecasters worst enemy is someone with a good memory.”

So for the record, with all but a few stragglers (less than 2% left) in the S&P 500 reported, how did it go?  Again, we turn to our friends at Standard and Poors and Factset for our information since they do a superb job of recording and presenting the results with no biases or opinions….just the facts, so to speak.

Key Metrics From Factset

• Earnings Growth: The estimated earnings growth rate for Q1 2013 is -0.6%. If the final number is negative, it will mark the second year-over-year decline in earnings for the index in the past three quarters.
• Earnings Revisions: On December 31, the earnings growth rate for Q1 2013 was 2.2%. All ten sectors have recorded a decrease in expected earnings growth, led by the Materials, Consumer Discretionary, and Information Technology sectors.
• Earnings Guidance: For Q1 2013, 82 companies have issued negative EPS guidance and 25 companies have issued positive EPS guidance.
• Valuation: The current 12-month forward P/E ratio is 13.4. This P/E ratio is between the 5-year average (12.8) and 10-year average (14.2).
• Earnings Scorecard: Of the 489 companies that have reported earnings to date for Q4 2012, 71% have reported earnings above the mean estimate and 64% have reported revenues above the mean estimate.

Our View on the Year End 2013 S&P 500 Earnings

Here is where we chime in…the Valuation point above is based on estimates that are entirely too high in our opinion. The following chart of the total all in public analysts estimates for the rest of the year 2013 paints a laddered picture of rungs that are just too high in our opinion…BUT we of course COULD be wrong….we are comfortable in our skeptical opinion…here is your chart, again from
Factset:

Factset 3-8-13 SP 500 FWD EPS est

We are not saying numbers are going to fall off a cliff, however, blending the historical views to current from our friends at Standard and Poors, the following chart shows an optimistic view from early 2012, falling to more reasonable, but still too high levels in our opinion.

Standard and Poors 3-8-13 EOY S&P EST 2013

We hope we are wrong but we do not think so. Time will tell.

Thanks for reading our “diary” in this case….two graphs and an extra long post…I must still be on spring break….sorry too much java !!!

Have a Great Day!

JK