Wednesday, July 31, 2013

World MSCI Earnings & Revenues (excerpt)

Yesterday, I noted that S&P 500 forward earnings rose to another record high last week. That’s quite an accomplishment given that the forward earnings of the World MSCI (W-MSCI) stock composite reached a cyclical peak during the week of August 11, 2011, and has been flat-lining slightly below that peak ever since.

W-MSCI consensus earnings forecasts for 2013 and 2014 have been falling for well over a year, yet analysts are still projecting growth rates of 8.4% this year and 11.1% next year. In any event, I believe that forward earnings drive stock markets. World forward earnings is likely to remain flat given that the latest estimate for 2014 is only 4.2% above the latest value of forward earnings.

Earnings have stalled because revenues have been flat since early 2011. Estimates for this year and next year continue to be cut, yet revenues are expected to grow 3.4% this year and 4.7% next year.

Today's Morning Briefing: Small World. (1) The global index project. (2) World MSCI forward revenues and earnings flat-lining. (3) World forward profit margin below previous peaks. (4) Big drop in profit margin of emerging markets reflects rising labor costs. (5) The upside case for Europe. (6) Europe has weak revenues, weak margins, and a low P/E. (7) Another manufacturing index is looking up in Europe. (8) Germany is slowly, but surely, improving. (More for subscribers.)

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