Courtesy of Mark Hanna at MarketMontage. View original post here.
You wouldn't know it from the stock market's performance but over 20% of S&P 500 companies have lowered their estimates for earnings. So consider the bar now officially very low, and easy to beat and we can now hear once more about "70% of companies beat their estimates!"
According to Thomson Reuters, there have been 108 negative EPS preannouncements by S&P 500 companies for the first quarter, compared with just 23 positive ones. The resulting negative-to-positive ratio of 4.7 would be the most negative guidance sentiment since the third quarter of 2001.
And just like last year almost all this year's earning growth (double digit of course) is currently projected in the third and fourth quarter (which a year ago at this time was set at double digit growth, but fell far lower).
Overall, analysts polled by Capital IQ expect year-over-year S&P 500 earnings growth of just 0.69%, down from projections of 3.65% on January 2 and 6.17% as of October 1.
So with the bar set so low at sub 1% growth on EPS (which is "an art not a science" versus revenue which is hard to play with), when the companies "beat" it will probably come in at 3-4%. As earnings continue to stagnate, it is all about the P/E expansion game.
On the revenue front, analysts polled by Capital IQ project growth of 4%. “That can be a bit alarming. We know companies can manipulate the bottom line, but it’s kind of hard to change that top line,” Short said.
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