Tuesday, August 12, 2014

A Happy Earnings Season (excerpt)

The latest earnings season is almost over, with 91% of S&P 500 companies having reported their Q2-2014 results. The latest blend of actual and estimated earnings shows a growth rate of 9.6% y/y. That’s up from the low of 5.9% at the start of the earnings season during the week of July 10. It is also up from the first quarter’s growth rate of 5.3%.

The solid gain isn’t surprising given the 6.0% (saar) growth in nominal GDP during the second quarter. It was up 4.1% on a y/y basis. What is surprising is the gain during the first quarter, when nominal GDP fell 0.8% (saar). However, it was still up 3.3% y/y.

S&P 500 revenues are driven by global nominal GDP, with the US accounting for a significant portion of that total, of course. S&P 500 forward revenues rose to a new record high at the end of July. Forward earnings rose to record highs yet again last week for the S&P 500/400/600. For the S&P 500, forward earnings was $128.22; it is converging toward the 2015 consensus estimate of $133.69 (as of last week), which has been edging higher recently.

Today's Morning Briefing: Revisiting Eurozone. (1) Earnings growth near 10% for Q2. (2) New record highs for forward revenues and earnings in US. (3) Tough year for EMU investors. (4) The case for resumption of EMU bull market in stocks. (5) TLTROs will soon provide lots more ECB liquidity. (6) Bond yields plunging and euro falling should help too. (7) Uptrends in exports to Eurozone and in retail sales. (8) EMU forward earnings bottoming, maybe. (9) EMU MSCI cheaper than US MSCI, as usual. (10) Leading indicators weaken, especially in Germany. (11) Resolution of Ukraine crisis will determine whether buying opportunity is now or in the foreseeable future. (More for subscribers.)

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