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Earnings Growth To Collapse Most Since 2009 In Q2
While the S&P managed to post positive earnings growth in Q1 thanks in part to collapsing analyst EPS estimates (i.e. aggressive downward revisions) and bottom line-inflating, equity linked compensation-boosting corporate buybacks, Q2 looks set to be the quarter in which the bottom finally falls out.
As FactSet notes, Y/Y earnings for the S&P are set to fall 4.7% in Q2, the first Y/Y decline since 2012 and the worst performance since Q3 2009:
The estimated earnings decline for Q2 2015 is -4.7%. If this is the final earnings decline for the quarter, it will mark the first year-over-year decrease in earnings since Q3 2012 (-1.0%), and the largest year-overyear decline in earnings since Q3 2009 (-15.5%).
Note also that even if one strips out energy, earnings growth for Q2 is still only expected to come in at 2%, well below the ex-energy print for Q1 and if one looks at ex-energy earnings growth by year, the trend is clearly not your friend:
And here’s a look at the sector breakdown of Q2 guidance — again, the trend speaks for itself:
But perhaps more disconcerting than all of the above, is the abysmal forecast for top line growth, which is set to fall 4.4% Y/Y, marking the first time since 2009 that revenue growth has been negative for two consecutive quarters and underscoring the fact that it’s easier to engineer bottom line beats than top line outperformance:
The estimated revenue decline for Q2 2015 is -4.4%. If this is the final revenue decline for the quarter, it will mark the first time the index has seen two consecutive quarters of year-over-year revenue declines since Q2 2009 and Q3 2009. It will also mark the largest year over-year decline in revenue since Q3 2009 (-11.5%).
Finally, forward P/E multiples have diverged markedly from their 5- and 10-year averages as equity prices are no longer anchored in anything that even resembles economic reality:
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So for all of those buying at the top, just note that you're now paying quite the premium (vis-à-vis historical averages) for a dollar of future earnings and you're doing so while staring down a Fed rate hike cycle that, if history is any guide, could trigger a rather nasty, 1937-style, QE4-inducing sell-off sometime around Fed funds 75bps.
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But Greece is saved for the next month so everything is awesome!
C'mon!
Since LEHMAN!
Say it!
I'm just glad none of this can affect the price of my stawks, because it sounds pretty grim otherwise.
Greece owes you $20. They haven't paid you in a year even though they were supposed to pay you back within one year.
So you take $20 out of your pocket and hand it to Greece.
Greece hands it right back to you.
You claim that Greece paid you back the $20 they owed you and now you give them one year to pay back the new $20 loan.
----
Somehow everyone believes that Greece paid back their loan even though they didn't ever have the $20 to pay it in the first place.
Now you marvel at the stupidity of the supposed smartest people in the room.
Great summary adr. It's worse though. Greece was hungry and borrowed the money in the first place. Now, they are even more hungry.
No need to worry M/A activity will ramp up.
All in short as of 11:30...this piggie is bloated. Greece is toast, nothing has changed
With a loose stop...like Yellens catchers mit
Ha, earnings.
You don't need earnings in QE Land.
You can just overstate your profit billions of dollars above your net income. Because everyone knows you can have more money in your bank account than you actually earned.
The CURSE does not forgive. George Washington warned us and we didn't listen >>>> https://biblicisminstitute.wordpress.com/2014/07/17/is-america-cursed/
Why didn't we get our aforementioned " Before Lehman "
Dow's up 100 points.
Somebody downvoted you because you stated a fact.
That's rich.
Earnings? We ain't got no earnings. We don't need no earnings. I don't have to show you any stinking earnings!
Those poor, pitiful corporations (tear).
"Black coffee, no sugar, no cream". Heavy D.
you heard about obama coffee by now right? black and weak
Well, as interest rates crawl back up towards normal the buybacks first cease, and then the borrowed money that paid for many buybacks has to be repaid, so yes EPS growth for the next few years will be burdened by that. Plus, any growth has to be on top of these artificially high numbers. Yet, if it all unfolds VERY slowly as the Janet seems to intend, we may get used to it after a while and it should be mostly harmless. Maybe.
Welcome to Japan.
Them banksters need to commit more FRAUD and jump more frequently. Problem solved.
As a business right now Q2 is worse than Q1. On top of it, we are actually behind from last year. At the moment people aren't buying those major purchases. A lot more fixing instead of replacing. It also seems there isn't as much balance in sales throughout a week/month. Slow followed by very busy.
Not to mention ever increasing taxes...
Bullish!
This is different that 1937. The Fed did not have a plunge protection team destroying anyone who dared to sell off or short the market
The Fed is all in balls to the wall and cannot and will not stop propping up the market.
Of course this will end badly but we have no precedent for this so it is not possible to know what the trigger will be.
One thing we do know is that when this fucker blows... it will make the Great Depression look like prosperity
Beware of the American CURSE >>>> https://biblicisminstitute.wordpress.com/2014/07/17/is-america-cursed/