Tuesday, July 10, 2012

S&P 500 Consensus Expected Earnings

On April 5, I started tracking consensus expected earnings for the S&P 500 for each quarter of this year on a weekly basis. I haven’t found a historical database with this information, so I’m doing it myself for now. I’ve observed a recurring pattern of estimate cuts in the weeks leading up to the reporting season for total S&P 500 earnings. Now I’ll be able to track how widespread this pattern is among the 10 sectors.

From April 5 through July 5, the S&P 500 consensus expected earnings estimate has been cut by 3.3% down to $25.22 per share. All but one of the 10 sectors' estimates was lowered over this period. Leading the way down has been Financials, which isn’t surprising given JP Morgan’s whale of a trading loss during the quarter. Among the losers, Industrials estimates have been cut the least. Here is the earnings derby so far: Telecom Services (3.3), Industrials (-0.7), Information Technology (-1.4), Health Care (-2.2), Utilities (-2.2), Consumer Staples (-3.9), Energy (-4.1), Materials (-4.5), and Financials (-7.7).

Are we set up for lots of positive earnings surprises as a result of these downward revisions? That was the pattern since Q1-2009. My hunch is that the pattern will be broken this quarter as companies report results that are in line with downwardly revised forecasts. More important may be how they guide for the rest of the year. They are likely to guide downwards. Industry analysts have been anticipating this by lowering their Q3 estimates for all but two of the 10 sectors.

Today’s Morning Briefing:  Some Good News, Really! (1) Silver linings in dark clouds. (2) YRI Earned Income Proxy soared in June, especially adjusted for inflation. (3) Our proxy closely tracks actual earned income and consumer spending. (4) German manufacturers had a good May. (5) China’s NM-PMI had a good June led by property sector. (6) Japan’s Tankan isn’t tanking. (7) Q2 earnings estimates cut for 9 of 10 S&P 500 sectors during Q2. (More for subscribers.)

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