Both the levels and the growth rates of S&P 500 revenues and US nominal exports are highly correlated. Nominal exports remained in a volatile flat trend during the first two months of the first quarter. This might be one reason why revenues have been lower than expected during the first quarter’s earnings season. Of the 270 S&P 500 companies that have reported, 56% had negative revenue surprises. Nevertheless, analysts’ consensus revenue estimates are holding up surprisingly well for this year and next year with gains of 3.0% and 4.6%, respectively.
S&P 500 profit margin estimates are also holding up, with 9.8% expected this year and 10.5% expected next year. I expect margins to remain flat in 2013 and 2014. So earnings should grow at the same pace as revenues. For earnings, I am still predicting $110 per share this year, up 5.9% y/y, and $118 next year, up 7.3%. Obviously, I am more optimistic about the prospects for revenues than the analysts. However, because they are more optimistic on margins, they are currently predicting that earnings will be $111 and $124 this year and next year.
Today's Morning Briefing: Austerity & Disruptive Innovation. 1) From Tribeca to London. (2) If I had a hammer. (3) Stockman, Psy, and me. (4) Christensen, Schumpeter, and Marx. (5) Capitalism creates winners and losers all the time. (6) Politicians know how to win. (7) The anti-austerians fight back. (8) Reinhart & Rogoff’s big error. (9) Frustrated central bankers do more of the same. (10) The anti-austerity bull market in stocks. (11) The BRAINE revolution. (12) GDP is a mix of new and old normal. (13) “Mud” (+). (More for subscribers.)