Tuesday, July 9, 2013

Forward Earnings & Revenues at New Highs (excerpt)

In the next few days, the IMF will release its latest estimate for global economic growth. Yesterday, at an economic meeting in the southern French city of Aix-en-Provence, IMF Chief Christine Lagarde warned that the estimate is likely to be revised down a bit.

She noted that the global economic recovery was advancing at mainly three different speeds from an average 5.5% in emerging economies, to 2.0% in advanced countries like the US and Australia, to no growth in the dead-in-the-water economies of the euro zone. Lagarde said, “We therefore had a [global] growth forecast which was about 3.3%. But I am afraid when taking into account what we are currently seeing in the economies of the emerging countries in particular ... I am afraid that we are perhaps a little bit below.”

So why did S&P 500 forward expected revenues rise to another record high at the end of June? Those expectations drive analysts’ estimates for forward earnings, which is also at a record high. These 500 companies generate at least half of their sales overseas.

A closer look at the revenues estimates shows that analysts are expecting relatively anemic growth of 2.3% this year and 4.3% next year. Those estimates actually are weaker than the IMF’s forecasts of nominal world GDP growth rates of 5%-6% this year and next year. Other global economic indicators confirm that record highs are being set, but at a relatively slow speed.

Today's Morning Briefing: Three Speeds. (1) IMF chief sending smoke signals: Slower growth ahead. (2) Fast-growing emerging economies are slowing. (3) US is in second gear. (4) Europe is dead in the water. (5) Global economic indicators rising to record highs at slow pace. (6) S&P 500 forward revenues and earnings at record highs again. (7) BRICs hit a wall. (8) Germany remains stalled. (9) US looking great by comparison. (10) Overweight-rated S&P 500 Transports beating S&P 500. (11) Trucking index cruises to new high. (12) Earnings season line-up. (More for subscribers.)

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