As the gap between GAAP and non-GAAP converges (and not in a bullish way), BofA reports the earnings estimate revision ratio (ERR) fell for the sixth consecutive month, to 0.47 from 0.49 – its lowest level since April 2009. So despite the exuberant, we're going back to record highs, rally off the lows, the real mother's milk data suggests more than twice as many cuts vs. increases to earnings forecasts over the last three months... and it's not just Energy anymore.
This is the lowest S&P500 GAAP earnings per share since 2010.
Needless to say, a GAAP P/E above 21 is the highest since the financial crisis.
So what is going on here? The chart below showing the amount of EPS "writeoffs" and pro-forma adjustments should explain it. In 2015, 26.5 of the total non-GAAP in S&P earnings, is the result of accounting gimmicks.
Just so there is no confusion: the GAAP to non-GAAP adjustment has nothing to do with the overall deterioration in corporate revenues and declining profitability. The two are parallel, because while both non-GAAP and GAAP EPS are clearly declining, what Wall Street is doing is using every possible contrivance to make the descent appear far less disastrous.
And looking forward, BofA's earnings estimates revisions data points to further collapse...
All ten sectors are seeing more below- than above-consensus guidance as Sales forecast revisions crash near the most since 2008/9 lows...