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Why S&P 500 Revenue And EPS Forecasts Were Just Slashed By One Third
Less than three months ago, on September 30, 2014, "consensus" expected that EPS and revenue growth in 2015 would be 11.8% and 4.3%, respectively. As of December 19, those projected growth rates have plunged to 7.9% and 2.8%. In other words, both revenue and EPS growth has been slashed by one third in under one quarter (while revenue growth for Q1 and Q2 2015 has cratered from 4.5% and 3.6% to 1.4% and 1.0%, respectively). Why? Spotting the "odd one out" in the charts below should provide the answer:
EPS:
Revenue:
And that's before the majors have even provided their own substantial guide downs.
Bottom line: S&P revenue and (non-GAAP) EPS are going even lower in 2015 until the new equlibrium in energy is uncovered, which considering all the record dumping that is about to take place, means it will take a long time before one has a grasp on where sales and EPS in 2015 will stabilize.
And here is Factset with its own take on the "consensus":
Not only has the estimated earnings growth rate for Q4 declined since the start of the quarter, the estimated earnings growth rates for the first half of 2015 have come down sharply over this same time frame as well. For Q1 2015, and Q2 2015, analysts are currently predicting earnings growth rates of 4.5% and 5.7%, respectively. These earnings growth rates are well below the estimated growth rates of 9.7% and 10.5% for these same two quarters back on September 30. Similar to Q4, most of the decline in the expected earnings growth rates for both quarters can be attributed to analysts lowering earnings forecasts for companies in the Energy sector.
Analysts have cut revenue estimates for the first half of 2015 as well. For Q1 2015 and Q2 2015, analysts are currently predicting revenue growth rates of 1.4% and 1.0%. These revenue growth rates are also well below the estimated growth rates of 4.5% and 3.6% for these same two quarters back on September 30.
Given the divergence in expected earnings and revenue growth over the next few quarters, however, analysts are expecting profit margins to continue to expand in 2015. Using the bottom-up sales-pershare (SPS) and earnings-per-share (EPS) estimates for the S&P 500 as proxies for expected sales and earnings for the index over the next few quarters, profit margin estimates can be calculated by dividing the expected EPS by the expected SPS for each quarter. Using this methodology, the estimated net profit margins for Q1 2015 and Q2 2015 are 10.2% and 10.6%. These numbers are above the estimated net profit margin for Q4 2014 (10.1%), and are also well above the average net profit margin of 9.4% recorded over the past four years.
Analysts have also lowered earnings and revenue estimates for all of 2015. The current earnings growth estimate for 2015 of 7.9% is below the estimate of 11.8% on September 30. The current revenue growth estimate for 2015 of 2.8% is below the estimate of 4.3% on September 30. Again, estimate reductions for companies in the Energy sector account for most of the decline in both the earnings growth rate and revenue growth rate for 2015.
But fear not: sliding non-GAAP EPS (which also means plummeting GAAP EPS) is nothing that a little more multiple expansion and stock buybacks can't fix (just remember to ignore everything that Blackrock warned about earlier namely that "S&P 500 Profits Are 86% Higher Than They Would Be Without Accounting Fudges"). So keep calm and BTFATH.
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Bullish...
spx earnings slashed by 1/3....hhmmm. that could only mean one of two things...increase buybacks enough to adjust for the lowered revisions or increase buybacks enough to adjust for the lowered revisions
problem solved....all hail SPX 3000
SUM TING SOFA KING WONG!
It's fairy dust and unicorn pee, the question is when do they hedge short and let it go into freefall.
It's fairy dust and unicorn pee,
The question is when do they hedge short and let it fall free!?
Fixed it.
You're a poet and don't know it but your toes show it.
All data is fake unless it agrees with your take.
-Johnnie Cochran
No worry, Wall Street will take it to new highs for their year-end bonuses.
Fed printing and buying stawks to boost bankers and Wall Street. It's all that matters.
This is only the start. Wait until the foreign numbers drop with a strong dollar - nobody is hedged......
Wait till retailers start reporting their Christmas 'earnings' You'll know it's time when Cramer starts talking up retailers as a good buy....
Even if they are hedged, who is on the other side of the bet? We're talking about trillions of dollars in transactions. Another AIG moment coming up?
Don't worry about the counter parties. Congress just made sure you have them covered.
I remember Barry's, "I am outraged by Wall Street Salaries and Bonuses" after the QE filled thier pockets with taxpayer monies .... and then the 'Do-Nothing-POUTS' presided over the Biggest, Fattest Wall Street Bonsues in history as his administration's policies gradually destroyed the Merikan Middle Class.
Since when did facts matter in a manipulated market? Or in a false reality?
long more slashing....
It's going to be a cold February....
Santa Claus FED software rally. BTFD bitchez. BTFD
It's cheaper to drive to work if you have a job, but the cost to live has been doubled.
Facts!..... we dont need no stinkin' FACTS!!!!
just wait til they reclassify obamacare as a tax on gdp production or gdp income, rather than gdp expenditure by treating it as core inflation.
santas stag (inflation reindeer?) can still shit skittles though
Just throw down the bets for when QE-4 starts already... Or at least, a wager or 3 for what sets the downslide in motion..? Jeezus, you gonna let a poor old Fcuk wither in the gutter without as much as a $crumb to speculate on...?
BitCoin down 58% US this year alone and somewhere the mythical Satoshi weeps ;-)
he may be crying into a lake...
never mind, the thing about making things up is you can also say "bitcoin outperformed the Hryvni"
http://www.coindesk.com/price/ plus http://www.xe.com/currencycharts/?from=USD&to=UAH&view=1Y
= go shitcoin, i mean bitcoin
check out the numis(bit)matic articles and headlines
Bitcoin's price is unstable because of its fixed supply, say experts. Is there anything we can do to fix that?
The bitcoin markets are the picture of serenity as commodities and currencies shed value around the world.
Bitcoin's low price is making things tough for hobbyist miners. Should they ditch the rig and buy bitcoins instead?
Heh, if bitcoin and the dollar each started from their own places, we could be talking about the dollar the same way as we are now talking about bitcon, woops bitcoin!
More than enough oil in the short term, not enough in the long term.
I have an honest investment question. If earnings per share and growth are slashed for 2015 does this not indicate the destructive ACA will be more punitive on businesses this year and years to come?
Also. If the Dow continues to increase does it not illustrate inflation by the fact that a 200+ day on the Dow doesn't mean the same as it did when the Dow was 10k?
The increase sounds good but when compared to the number of the Dow it shows that the profit is less.
Yes/no. Why?
Just asking from someone who is not a trader.
RE: ACA - It's hard to tell. No tax is ever good, but I don't think you could singularly point at that and say "there it is, the problem!" There are lots of other government created problems plauging businesses. The garrot of regulation around their necks might kill them before the knife of ACA in their belly.
RE: Inflation - If you mean from an Austrian POV, then yes. If you mean from a Keynesian POV, then no. Politicians only view things from the Keynesian POV, so we can expect more. This will lead to a "crack-up boom". If you are careful - you can make some money. If you are not, you will get owned. The metaphor is "picking up nickles in front of a steam roller". When the boom turns, it will be nasty and fast with lots of opportunities to make some money while everyone else is losing their shirts (all very risky).
No, slashing expectations just makes it easier to beat projections allowing the stock market to keep its relentless 45 degree angle march higher.
True from a investing standpoint but I was referring to the continuing decline as it relates to businesses and not investment houses and firms. The S&P being the top 500 companies that have to engage in business. I look at it as an indicator for future business activity and inflations impact on it.
See my example below. A 200+ day on a 18k Dow is just above one percent. A 200+ day on 10k Dow is 2%. The more the Dow goes up yet the rallies stay the same, (100-200 pts) illustrates inflation does it not?
Yeah, good news for the new year.
There is no such thing as investing anymore, its only parking funny money in the ponzi de jour.
What is this concept "earnings" that you speak of?
Oh, nevermind. You don't need fancy theories to make money in this market!
'earnings' were slashed - so 85%+ will 'beat' earnings. meaning it's all good and stocks will blast higher. that is the game. memories are short. i can't believe it, but it's true.
S&P 500 headed for a turn-around pretty quickly now...
http://www.globaldeflationnews.com/sp-500-indexelliott-wave-update-for-w...
oh sole mio
https://www.youtube.com/watch?v=d_mLFHLSULw