Tuesday, September 17, 2013

Forward Earnings Still Heading Higher (excerpt)

Today is Earnings Tuesday when I review analysts’ consensus earnings estimates. Yet again, I am impressed to see the forward earnings of the S&P 500, S&P 400, and S&P 600 rising to record highs last week. The S&P 500 forward earnings is at $119.29 per share and converging toward analysts’ consensus expectation for 2014, which has stabilized recently just under $123.

S&P 500 revenues expectations are available through the first week of September. The bottom line is that forward revenues, which has been more volatile than forward earnings, rose to a new record high (Fig. 7). I calculate that the forward profit margin rose to a new cyclical high of 10.3%, nearing the previous peak of 10.5% during the week of August 30, 2007.

Yesterday, I reviewed some of the latest economic indicators that might indicate where earnings might surprise to the upside and downside during the Q3 earnings season next month. Yesterday’s industrial production release for August suggests that positive surprises are likely from the following industries: auto products, appliances, furniture, carpeting, transit equipment, and industrial equipment.

Today's Morning Briefing: Yelling for Yellen. (1) Is anxiety a prerequisite for relief? (2) More anxious moments ahead for the latest relief rally? (3) If FOMC lowers jobless threshold, there’ll be more upside for stocks and bonds. (4) Yellen speeches tend to charge up the bull. (5) The wings of a dove. (6) Yellen wants to see more “prudent risk-taking.” (7) Lookout! Fed is on the lookout for bubbles. (8) Thanks, Fairy Godmother! (9) How will we know if it’s irrational exuberance? (10) Forward earnings still moving forward to new highs. (11) Focus on overweight-rated IT. (More for subscribers.)

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