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"King Dollar" Is Crushing 'Recovery'Dreams, 87% Of US Companies Have Guided Lower

Tyler Durden's picture




 

The 'souring' of the mother's milk of stock markets continues. Management guidance and commentary implies 3-5pp impact due to 'king dollar' FX headwinds as an astounding 87% of companies guided below consensus expectations for next quarter. Bottom-up consensus 2015 EPS estimates were cut by 4% during January, and, as Goldman Sachs warns, 4Q EPS is tracking 7% below the consensus estimate at the start of reporting season. Finally, and perhaps most worrisome, granular bottom-up consensus is below top-down 'strategist' consensus for the first time since 2009... as the gap between Forward P/E valuations and long-term growth is as wide as it has ever been.

"King Dollar" is not 'unambiguously good' for America...

Revenue results are correlated to dollar strengthening, which has led to weaker revenue results and lower forward guidance that incorporates the FX headwind.

 

 

Anecdotally, management commentary implies the dollar strengthening will lower revenue growth by 300-500 bp. Foreign sales accounted for 33% of aggregate revenue for the S&P 500 in 2013.

 

Based on our earnings model, a 10% strengthening of the trade-weighted dollar lowers S&P 500 2015 EPS by about $3.

Bottom-up Consensus 2015 EPS is tumbling...

An astounding 87% of companies (39 of 45) guided below consensus expectations for next quarter, the highest level in our 34-quarter history. Historically, 71% of firms guide down in a typical quarter.

 

Full-year 2015 guidance also disappointed. 80% of firms guided earnings below consensus.

 

 

The median company guided 4% below consensus expectations for 1Q 2015 and 2% below consensus for full-year 2015.

 

Bottom-up consensus 2015 EPS estimates plummeted by 4% during January due to both falling oil prices and negative company guidance.

 

 

 

The $4.50 decline in EPS to $120.50 from $125 now places bottom-up consensus estimates below our forecast of $122 and the top-down consensus forecast of $125. Bottom-up consensus estimates were last below top-down estimates in 2009.

And finally - valuations...

Consensus long-term growth estimates are slumping... whch means multiple expansion is the only way to keep the dream of wealth creation alive. As @Not_Jim_Cramer exposes, this 'gap' has seldom - if ever - been wider...

 

 

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Sat, 01/31/2015 - 20:35 | 5730186 knukles
knukles's picture

"A strong dollar is good for America"
              - Timmah

PS  Always interesting that the only time top down and bottom up earnings forecasts merge is at announcement.... kinda like convergence at delivery in the futures markets.
For those of you unfamiliar, all I can say is "Booyah!"

Sat, 01/31/2015 - 20:57 | 5730241 Publicus
Publicus's picture

A strong currency is good for the country. Import tarrif fixes all. The end of globalization is at hand, all countries must be self sufficient.

Sat, 01/31/2015 - 21:13 | 5730274 29.5 hours
29.5 hours's picture

 

 

Yes. Every country can be a net exporter. They can do this by putting up tariff walls against imports. Sounds like a plan.

 

 

Sat, 01/31/2015 - 20:39 | 5730203 Whoa Dammit
Whoa Dammit's picture

US companies are guiding lower because no on has any dollars to buy their products. Strength or weakness of the dollar has fuck all to do with it. Corporate gods and their lay off practices which raise their stock values in order to feather their own nest are the true culprits here.

Sat, 01/31/2015 - 23:33 | 5730652 Osmium
Osmium's picture

They will guide lower and then "Beat" those lowered numbers and the algos will cheer.

Sun, 02/01/2015 - 13:53 | 5731754 Fed-up with bei...
Fed-up with being Sick and Tired's picture

PLUS, the best work here in ZH is when they blow the lid off of two HUGE issues with these companies:  1)  NON_GAAP earnings; and 2) SHARE PURCHASES.....both are very real and no one, anywhere that has any readership, is covering these issues.    I also worked for Public Companies back in "the day" ( I am a boomer, retired, trading options) and it was common place back then to fudge forecasts, "rear-load" shipments, and in some cases SHIPPING INTO truck trailers and seeking orders to fill them later.  It was an eye-opener to have a peek inside of the Greed of those guys in charge, who were born in the 1900-30's...how incredibly corrupt things were but to see it FIRST HAND, still affected my thinking to this very day.

Sun, 02/01/2015 - 13:53 | 5731755 Fed-up with bei...
Fed-up with being Sick and Tired's picture

PLUS, the best work here in ZH is when they blow the lid off of two HUGE issues with these companies:  1)  NON_GAAP earnings; and 2) SHARE PURCHASES.....both are very real and no one, anywhere that has any readership, is covering these issues.    I also worked for Public Companies back in "the day" ( I am a boomer, retired, trading options) and it was common place back then to fudge forecasts, "rear-load" shipments, and in some cases SHIPPING INTO truck trailers and seeking orders to fill them later.  It was an eye-opener to have a peek inside of the Greed of those guys in charge, who were born in the 1900-30's...how incredibly corrupt things were but to see it FIRST HAND, still affected my thinking to this very day.

Sat, 01/31/2015 - 20:45 | 5730215 Sudden Debt
Sudden Debt's picture

American export is 20% to expensive since november and the funny part is that all the cou tries it sancioned are actualky now profiting from it!

Sat, 01/31/2015 - 20:52 | 5730231 dexter_morgan
dexter_morgan's picture

Our leaders are geniuses.........

Sat, 01/31/2015 - 22:03 | 5730421 disabledvet
disabledvet's picture

SUPER Genius's actually...

 

With a 4.0 from Yardale no less!

Sat, 01/31/2015 - 23:42 | 5730671 starman
starman's picture

I don't have a leader! I lead! The strongest survive!  

Fuck this government fuck this president!  

Sun, 02/01/2015 - 05:23 | 5731061 Sudden Debt
Sudden Debt's picture

Yes, they know best :)

Sat, 01/31/2015 - 20:49 | 5730221 Yen Cross
Yen Cross's picture

  King Dollar is running on borrowed time.

 Chart to follow.

Sat, 01/31/2015 - 20:53 | 5730237 Bay of Pigs
Bay of Pigs's picture

"Rah Rah King Doelarr!!!!"

Somewhere Mr Lennon Hendrix is smiling...

Sat, 01/31/2015 - 21:01 | 5730254 Yen Cross
Yen Cross's picture

 I'm running dual monitors, so the image will be split screen.

 The usdx is clearly forming a top.

Sat, 01/31/2015 - 23:58 | 5730690 seek
seek's picture

That chart is scary on any time scale it's plotted on. That's not just any top, either, given that it's beat every prior (recent) top by a signficant margin.

Stumbled across this long-long term chart looking for more data, it's sort of amusing in a sad way.

Sat, 01/31/2015 - 21:14 | 5730273 Arrowflinger
Arrowflinger's picture

 

Humpty Currency sat high on the wall.

 

Humpty Currency took a hard fall.

All the Fed's whores and all the Fedmen

Couldn't rig Humpty Currency Markets ever again.

 

 

 

Sat, 01/31/2015 - 21:12 | 5730272 buzzsaw99
buzzsaw99's picture

top down, bottom up

sounds like a good title for college library porn

Sat, 01/31/2015 - 21:16 | 5730283 Soul Glow
Soul Glow's picture

When the Fed can not even forward guide properly how can we expect corporations to do so?

Sat, 01/31/2015 - 21:19 | 5730301 Spungo
Spungo's picture

Bitches, we should all be getting ready to short the dollar. That means you borrow strong dollars, buy assets with them (gold?), and pay the loan back when the dollar falls. You can measure the strength of USD against the CAD since Canada's dollar is mostly backed by commodity exports: https://www.google.com/finance?q=USDCAD&ei=3H7NVMD5Fs6yiALko4BY

Sat, 01/31/2015 - 21:36 | 5730343 buzzsaw99
buzzsaw99's picture

you first, don't forget to lube up

Sat, 01/31/2015 - 21:30 | 5730326 Carpenter1
Carpenter1's picture

And the FED PhD's don't know or understand this dynamic right? Something a grade 10 dropout can grasp, but the FED missed it.

 

Wake the fuck up, the FED knows exactly what they're doing. Imploding the global economy.

"Order through chaos." 

Sun, 02/01/2015 - 04:19 | 5731018 kchrisc
kchrisc's picture

I, and many others have been saying it, but here goes again: The artificial rise in the dollar is to facilitate the connected, and the Amongsts', exit from the DC US, and dollar. It is also an exit,and payoff, to the Arabs/Saudis for using oil as a weapon against Russia.

I think the proof, or least the support, for that idea is that while oil is being used as a weapon, the dollar's rise is mitigating that weapon's effect on Russia.

The banksters need to repay us.

 

Coincidentally, I was reminded of this tonight while watching "Rollover (1981)." In the film, the Arabs/Saudis are trying to quietly get out of the dollar and into mostly gold. Their maneuvers get found out, and all hell breaks loose. Good watch, with some interesting points.

Sun, 02/01/2015 - 04:42 | 5731036 besnook
besnook's picture

so the setup is in for a runaway good quarter when the dollar weakens and oil stays cheap.

Sun, 02/01/2015 - 06:28 | 5731092 Ban KKiller
Ban KKiller's picture

Fire the  last few accountants, right? Lie until caught, meanwhile selling insider stock. See Nationstar mortgage and their ilk....whistle blowers are squealing!

Recovery still needs to shed the parasites...you pick them.

Sun, 02/01/2015 - 07:33 | 5731131 Billy Bob101
Billy Bob101's picture

The PTB tell us they are terrified of deflation and are doing everything they possibly can to restart inflation through QE and ZIRP.  I suspect that QE/ZIRP is a major source of the deflation if not the primary cause. 

Obviously, the purpose of QE is to create the fiction that there is a buyer for government debt.  The purpose of ZIRP is to minimize the nominal cost, and also to prevent income from reaching the real economy. 

Who would benefit from a deflation?  Holders of cash, cash equivalents, bonds and notes receivable.  Who exactly is in a position to have these? 

Sun, 02/01/2015 - 10:23 | 5731301 1stepcloser
1stepcloser's picture

king dollar can't even make PMs cheaper for me to purchase.  King of nothing!

Sun, 02/01/2015 - 11:02 | 5731371 quasimodo
quasimodo's picture

I beg to differ. King dollar has done a very fine job making them cheaper for you as of late. Just take a look at the queen bitch Comex.

Sun, 02/01/2015 - 11:18 | 5731402 BouncingCat
BouncingCat's picture

The dollar is strong now, but the weak currencies elsewhere provide opportunities for those countries. Things will balance out if governments don't interfere. Unfortunately there is little patience and solutions need to be identified and sold in 30 minutes (the length of a sit-com).

God help us if the US Govt or Fed Reserve tries to "fix" the dollar valuation.

Sun, 02/01/2015 - 13:55 | 5731768 Fed-up with bei...
Fed-up with being Sick and Tired's picture

The truly terrible part about this, and I am not trying to sound stupid or easily led, is that we have NO SAY, no influence, it does not matter how many of us stand up and scream...they NOW know that we will give it up or they will find a way to kill us one and all.  I SEE NO HOPE for this country.  We are sunk....have have been sunk since Reagan, but it is all coming to fruition now.

Sun, 02/01/2015 - 14:26 | 5731838 dimwitted economist
dimwitted economist's picture

We the People still have the FINAL Say.... (don't BUY the shit) Fuck em (each and every one of them)

Sun, 02/01/2015 - 15:44 | 5732072 brushhog
brushhog's picture

Fire up the printing presses! QE4 coming soon!

Sun, 02/01/2015 - 15:57 | 5732117 In.Sip.ient
In.Sip.ient's picture

You know, a currency that takes a decade to

rise /fall  30% ( e.g. the CAD$ ) is NOT a bad thing.

In fact it worked for Canada pretty well.

 

A currency that rises/falls 20% in a matter of weeks...

Now THAT's a BAD THING!  It isn't the rising or

falling of a currency that is a problem... its the

"delta V"  that is always a problem.

 

Like falling out of a building, the fall won't

hurt one bit... the sudden stop at the bottom WILL!

 

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