Thursday, July 14, 2011

S&P 500 Earnings

Financials have been a drag. The consensus expected earnings for this S&P 500 sector for 2011 dropped 2.3% during the week of July 7 to a new low of $15.31 per share. This estimate is down 18.2% from a year ago and 23.3% from two years ago. The sector’s forward P/E peaked at 17.6 during September 2009 and is now down to 11.3. The sector has been underperforming the S&P 500 since April 2010. We’ve rated it an underweight since October 18, 2010 and continue to do so.
The Financials sector is starting to weigh on the overall S&P 500. The composite’s 2011 consensus earnings estimate fell 1.4% over the past two weeks through July 8. This figure actually continues to flatline, as it has been doing since mid-2009.

The recent drop in earnings expectations for the Financials has had a noticeable impact on the second quarter’s consensus earnings expectations for the S&P 500. Before Bank of America announced its big earnings hit on June 29, the S&P 500 earnings consensus was at $24.43 during the week of June 24. It dropped by $1.35, or 5.5%, to $23.08 during the latest week of July 8.

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