SIXL - S&P 500 Earnings: Forward Estimates Have Definitely Firmed

2023-08-07 04:04:00 ET

Summary

• The forward 4-quarter estimate rose $0.40 this past week to $230.84 from last week’s $230.44.
• For the first time this quarter, the quarterly, bottom-up, S&P 500 EPS estimate for Q2 ’23 ended the week at $53.26, higher than the June 30 ’23 bottom-up estimate for Q2 ’23 of $52.91.
• Earnings watchers are not seeing the slow, steady, downward revisions to 2nd half ’23 and 2024 EPS data that is normally in evidence in a "normal" market so to speak.

Last week’s blog post could have been cut and pasted again and left as this week’s blog post, but it’s best to update readers on the numbers and give you a look at the trends in the data.

S&P 500 data:

• The forward 4-quarter estimate ((FFQE)) rose $0.40 this past week to $230.84 from last week’s $230.44, and the interesting thing is that - since IBES data by Refinitiv cuts off the data as of Thursday night - the Amazon ( AMZN ) and Apple ( AAPL ) earnings reports are not fully incorporated yet into the forward estimates;
• The P/E on the S&P 500 ended the week at 19.4x versus 19.8x last week;
• The S&P 500 “earnings yield” ended last week at 5.15% versus the 5.03% the week prior, and the 5.8% to start 2023;
• For the first time this quarter, the quarterly, bottom-up, S&P 500 EPS estimate for Q2 ’23 ended the week at $53.26, higher than the June 30 ’23 bottom-up estimate for Q2 ’23 of $52.91;
• Interesting stat: the Q2 ’23 “upside surprise” or “beat rate”, is currently 7.7%, and is actually higher than Q1 ’23’s 6.8%, indicating a 2nd strong quarter of robust earnings growth. The Q2 ’23 revenue upside surprise is a little lower than Q1 ’23 at 1.7% versus the 2.2% from Q1 ’23.

Rate of change:

Wonky and heavily quantitative, this spreadsheet plots the “forward 4-quarter” estimates on a rolling 4-quarter basis for the S&P 500, and then calculates the rate of change for various time periods of the forward estimates.

Readers should note the sequential rate of change and the 4-week rate of change, both of which are firming nicely.

Another way to look at the rates of change:

Note how Q2 ’23 S&P 500 revenue just went positive this week in terms of year-over-year growth. Let’s see how it actually ends the quarter. Note too - something that’s been brought to readers' attention for a while now - how Q4 ’23 S&P 500 EPS and revenue continue to see few negative revisions.

2024 expected EPS growth remains solid as well.

All this base data is sourced from IBES data by Refinitiv, but the spreadsheets and calculations are my own, hence any errors or mistakes are solely mine.

Summary/conclusion:

The big takeaway from the above data and other data not shown above is that earnings watchers are not seeing the slow, steady, downward revisions to 2nd half ’23 and 2024 EPS data that is normally in evidence in a “normal” market so to speak. Does that mean that we won’t see this type of erosion in the future? No, not at all, it’s just that the above data speaks to expected solid S&P 500 EPS, regardless of what may happen to the market.

With the top 10 mega-cap names in the S&P 500 now having reported, the trends in the data have more significance, given the earnings weight of the technology sector. This article from July 13th using some of the Refinitiv on the companies expected to be the biggest EPS contributors to the S&P 500 was quite helpful.

Take all content above with substantial skepticism, and strictly as one person’s opinion. All source EPS and revenue data regarding the S&P 500 are sourced from IBES data by Refinitiv. Past performance is no guarantee of future results. All content and opinions above may or may not be updated and if updated may not be done in a timely fashion. Investing involves risk and potential loss of principal. Readers should gauge their own appetite and comfort level for market volatility and adjust accordingly.

Thanks for reading.

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