Earnings are the ultimate driver of stock prices. Yaa yaa, the Federal Reserve as we know all too well also has a hand, but that is a different story.
Most publicly traded companies report in a public venue quarterly. Several years ago we coined the term, 90 day treadmill as it comes at you fast AND can cause short-term knee jerk reactions … another story for a different time.
Earnings Season Under Way
As of today we are a little over 10% of the was through, using the S&P 500 as our benchmark.
So how have we done? … Awful, BUT not as bad as expected.
This from our friends at Factset:
- Earnings Scorecard: Of the 56 companies that have reported earnings to date for Q1 2015, 77% have reported earnings above the mean estimate and 46% have reported sales above the mean estimate.
- Earnings Growth: For Q115, the blended earnings decline is 4.1%. If the index reports a year-over year decline for the quarter, it will be the first time since Q3 2012 (-1.0%).
- Earnings Revisions: On March 31, the estimated earnings decline for Q1 2015 was -4.7%.
- Valuation: The current 12-month forward P/E ratio is 17.0. This P/E ratio is based on Thursday’s closing price (2104.99) and forward 12-month EPS estimate ($123.94).
Broadly management teams are meeting earnings expectations while still in search of sales!
Just by chance we stumbled upon a terrific interview last week that rhymes with our views by a very famous person on Wall Street. Much of the interview explains eloquently some of the economic growth woes. Watch for a multiple part weekly Wednesday series!
Have a Great Monday!
John A. Kvale CFA, CFP
http://www.jkfinancialinc.com
http://www.street-cents.com
8222 Douglas Ave # 590
Dallas, TX 75225
Earnings Review … aka 90 day Treadmill … Revenue the missing link, found?
As mentioned Friday, earnings are the key drivers to asset growth and appreciation. While we do not want to get into the weeds too much on this, continued growth bodes well for continued market appreciation… and maybe growth into the Frothy valuations.. From our fantastic friends at Factset.
Earnings Growth for the Immediate Quarter Looks Great
While a very short term time frame, (3-5 years is our normal time frame) this 90 day treadmill aka earning season chart shows the move upward in expected earnings growth rate. Continued movement at this rate would certainly help us grow into the current valuations.
EPS- Earnings Per Share
Ok, sure the EPS Earnings Per Share- solid line is moving down as time has passed for this quarter, BUT, the scale is very narrow and the amount of lowered expected EPS growth is only slightly less…
Revenue/Sales Growth FINALLY?
Be it the Great Recession lingering effects, demographics, economics, world growth or technological advances, Sales or Revenue has been missing during this economic recovery. In reviewing this chart, Energy, bouncing back from a much lower price just a year ago is making up much of the sales increase, however other sectors are chiming in too. Could this FINALLY be the sales increases we have all been waiting for? Compliments to all company managers for cutting expenses in order to maintain profitability, however there are only so many cuts that can be made. If sales increases continue, this would provide much needed breathing room for managers.
Time will tell! So far its looking good!
Have a Great “Growth in Earnings” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
http://www.jkfinancialinc.com
http://www.street-cents.com
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Posted in Earnings, Earnings Season, Forecast, Investing/Financial Planning, Market Comments
Tagged 90 Day Treadmill, Earnings, Earnings Season, Economy, EPS, Factset