Tuesday, April 24, 2012

S&P 500 Earnings

Industry analysts are curbing their enthusiasm about the outlook for Q2-Q4 despite the positive surprises reported so far for Q1. They’ve barely raised their estimates for the next three quarters, although the actual/estimate blend for Q1 is already up by 80 cents since the start of the earnings season. That’s because only about a third of the companies that have reported so far raised their guidance for Q2, while 40% lowered it.

During the week of April 20, they forecasted that the S&P 500 earnings per share will be $106.32 and $119.34 this year and next year, respectively. That’s up 8.7% and 12.2% in 2012 and 2013. That optimistic outlook is driven by their latest estimated revenue growth rates of 6.0% and 5.3% this year and next year, with the profit margin rising from 9.3% in 2011 to 9.5% in 2012 and 10.2% in 2013. I’m skeptical that the profit margin is likely to rise as they expect.

We’ve updated our Earnings Month with April data for the S&P 500 along with its 10 sectors and numerous industries. Among the more interesting findings is that the Net Earnings Revisions Index (NERI) turned flat after a seven-month string of negative readings. Three sectors turned solidly positive, namely Consumer Discretionary (9.6%), Financials (6.9), and Information Technology (6.3).

Today’s Morning Briefing: Dutch Treat (1) Europe needs supply-side economics... (2) … and to hire Luca Brasi to collect taxes. (3) Dutch boy has a solution. (4) Austerity is losing elections and toppling governments. (5) No vote of confidence in European stock and bond markets. (6) Nudging up our earnings forecasts. (7) Net earnings revisions improving, especially for Consumer Discretionary, Financials, and IT. (8) Euro area industrial orders take a turn for the worse led by Italy and Spain. (More for subscribers.)

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