Key Points:
- First Quarter earnings season was very strong. Surprise ratio 4.93 with a 6.67% median surprise, 75.0% report better than expected results.
- Second Quarter earnings expected to be up 22.5%, 18.1% in third quarter year over year.
- The total net income growth 46.5% in first quarter well below 104.0% growth in fourth quarter, but excluding Financials growth accelerates to 37.2% from 12.4%.
- Sales Surprise ratio at 2.24, median surprise 1.25%, 65.0% of all firms do better than expected on top line.
- Total revenues expected to rise 8.3% in second quarter, 5.3% in the third quarter year over year.
- S&P 500 reported Revenues up 11.9% year over year in 1Q, up from over 6.3% revenue increase the same firms showed in the 4Q. Most of the revenue strength in the 4Q was from Financials, some of which actually posted negative revenue (not declining revenue, but a top line that was in the red) in the 4Q of 2008. In 1Q 14 sectors reporting positive revenue growth, and only Aerospace and Construction showing negative growth. In 4Q nine had positive revenue growth and seven were negative
- Total S&P 500 Net Income in 2009 7.0% below 2008 levels, following 27.3% plunge in 2008. Total earnings for the S&P 500 expected to jump 34.7% in 2010, 18.6% further in 2011.
- Total S&P 500 Revenue in 2009 falls 6.6% from 2008 levels. Total revenues for the S&P 500 expected to rise 4.6% in 2010, 6.7% in 2011. No double dip in economy expected, but relative to 1Q results implies second half slowdown.
- Rebounding earnings for Autos, Finance, Materials and Energy to lead 2010 charge. Construction moves from loss to profit.
- Huge net margin expansion in 1Q expected to continue in 2010 and 2011.
- Revisions ratios fall to 0.93 for 2010, and to 0.81 for 2011, 2011 on cusp of Bearish reading, total activity near seasonal lows. Changes in revisions ratios mostly driven by old increases falling off 4 week moving totals.
- Nine sectors now have more cuts than increases for 2010, Staples 3x as many cuts as increases. Nine also have revisions ratios below 1.0 for 2011.
- Firms up/firms down ratio at 0.93 for 2010, 0.72 for 2011 much weaker than just a few weeks ago.
- S&P500 earned $545.9billion in 2009, expected to earn $735.4 billion in 2010, $879.2 billion in 2011.
- S&P 500 earned $57.52 in 2009, $77.50 in 2010 and $93.00 in 2011 expected bottom up.
- Top Down estimates: $81.29 for 2010, $95.28 for 2011.
First quarter earnings season is now over, and the vast majority of firms reported over a month ago. Thus the number of changed estimates over the last four weeks has fallen dramatically. Most of the estimate changes that are falling out of the four week totals were estimate increases, and as a result over the last two weeks we have seen a dramatic decline in the revisions ratios for both 2010 and 2011. In addition the economic reports have been coming in weaker for May than they were for April, and that is starting to have an effect, as are the problems in Europe and the much stronger dollar that it has caused. That has caused some ratcheting down of expectations, particularly for the second quarter.
The first quarter earnings season was a remarkably strong one, both relative to year ago results, and relative to the expectations going into the quarter. There were 375 positive earnings surprises, versus only 76 disappointments, for a ratio of 4.93. The median surprise was 6.67%, which is very strong. Historically the surprise ratio tends to be around 3.0 and the median surprise at about 3.0%.
The results were even better than in the fourth quarter. For the full S&P 500 in the fourth quarter, the surprise ratio was 4.57 and the median was 5.54%. As far as growth is concerned, while it looks like the 46.5% is a big slowdown from the eye-popping 104.0% growth that the same firms posted in the fourth quarter, firms with positive year over year earnings growth lead firms with falling earnings year over year by a ratio of 3.16. Put another way, 76.0% of all S&P 500 firms reported growing earnings year over year. However, most of that fourth quarter growth came from financials that lost money in 2008’s 4Q and were in the black in the 4Q of 2009. Excluding the financials, growth has accelerated to 37.2% from 12.4%. Looking forward to the second quarter, year over year growth of 7.3% is expected for total net income, which is down dramatically from the 24.3% growth expected just a few weeks ago.
It was a strong reporting season for the top line as well as the bottom line, but to a lesser extent. Positive revenue surprises have topped revenue disappointments by a ratio of 2.26:1 and a median surprise of 1.25%. Positive revenue growth firms lead firms with falling revenues by 3.35 and 77.0% of all firms have higher revenue. In the fourth quarter 56% of all firms reported year over year revenue growth, and in the third quarter less than 30% of all firms did. Total revenues reported were 11.9% above the revenues a year ago. This extraordinary revenue growth is all the more impressive in that it is happening in a very low inflation environment. Looking forward to the second quarter, total revenues are expected to be up 6.3% from a year ago.
Looking at full year earnings, total net income fell by 7.0% last year, a much smaller decline than the 27.3% plunge in 2008 (financials were the big swing factor). This year will be one of earnings recovery, with growth of 34.7% expected, but note that that will still leave earnings below 2007 levels. Further growth of 19.6% is expected for total earnings in 2011, which would put them 8.9% above 2007 levels. Note that this will be long before total employment recovers to pre-recession levels. That is not likely to happen before 2013, and even that requires some very aggressive assumptions.
In 2009, the S&P 500 as a whole earned a total of $545.9 billion. That is expected to rise to $735.4 billion in 2010, and to $879.2 billion in 2011. That translates to Earnings “per share” of the S&P 500 of $57.52 in 2009, $77.50 in 2010 and $93.00 in 2011. The P/E ratios are 19.4x, 14.4x and 12.0x, which are very reasonable for a low inflation, low interest rate environment.
As for the top line, after a 6.6% plunge in 2009, revenues are expected to grow by 4.6% in 2010, followed by 6.7% growth in 2011. Implicitly, then, the analysts are predicating an economic recovery that gains steam in 2011, rather than one that peters out or double dips. While there are generally fewer estimates for quarterly revenue numbers than for annual revenues (and fewer revenues estimates than earnings estimates for both periods), the 11.9% revenue growth in the first quarter and the 8.3% expected growth in the second quarter, imply a rather sharp slowdown in the second half of this year, followed by a rebound in 2011. After all, the amount of revenue going through the combined hands of the 500 biggest firms in the country, would seem to correlate pretty well with overall economic activity. True there is economic activity outside of the S&P 500 and not all S&P 500 revenue comes from inside the US. But there is nothing to suggest those shares have shifted meaningfully over the last few years or will over the next two.
In 2010, the percentage growth numbers will not be really meaningful for the Auto and Construction sectors. Construction is going from a loss to positive earnings. While the 2009 numbers for Autos were positive, they are so close to break even that big percentage gains in 2010 are not to really be taken seriously. Among the larger sectors, Materials and the Financials are expected to be the growth leaders for the year. Energy and Tech are also expected to see a large rebound in its total profits. Energy is also expected to be the leader in top line growth.
The revisions ratios for both 2010 and 2011 are both now below 1.0, meaning more cuts than revisions, but are still in the neutral zone as opposed to being wildly positive during the heart of earnings season. Most of the drop in the revisions ratios is due to old increases falling out of the totals, but in the last week we have seen a small pick up in the number of cuts as well.
The earnings yields on the S&P 500 continue to look very attractive relative to the 10 year bond yield. A P/E ratio of 14.4x based on 2010 earnings translates into an earnings yield of 6.94% and based on 2011 earnings the S&P has a P/E ratio of 12.0x, or an earnings yield of 8.33%. That is well above the yield on the 10-year T-note of 3.23%. Stocks look very attractive, at least relative to bonds.
Scorecard & Earnings Surprise
- First Quarter earnings season very strong. Surprise ratio 4.93 with a 6.67% median surprise. All sectors have more positive than negative surprises. Two sectors perfect, and five more have surprise ratios of 8.0 or better. Five sectors have double digit median surprises. Total net income grows 46.5%.
- Ratio of positive to negative growth reports 3.16:1. Positive earnings growth in 76.0% of all firms reporting. Energy is the only sector with more negative than positive growers, despite 60.7% growth in total net income (big boys do well, smaller players not as much).
- With the first quarter over, attention is now focused on the second and even third quarter earnings which are presented in the quarterly growth table.
- Since only five (1%) of S&P 500 firms have reported, the data in the Table below shows the first quarter results for the whole S&P, and is the same table that was shown last week.
- The first quarter was a great earnings season both relative to expectations and to the year ago earnings levels, even somewhat better than the very strong fourth quarter on balance.
|
Scorecard & Earnings Surprise
|
|||||||
|---|---|---|---|---|---|---|---|
| Income Surprises | Yr/Yr Growth |
% Reported |
Surprise Median |
EPS Surp Pos |
EPS Surp Neg |
# Grow Pos |
# Grow Neg |
| Conglomerates | 7.23% | 100.00% | 31.25 | 8 | 0 | 6 | 3 |
| Industrial Products | 47.64% | 100.00% | 14.86 | 16 | 2 | 15 | 4 |
| Construction | – to + | 100.00% | 12.77 | 8 | 1 | 5 | 4 |
| Consumer Discretionary | 32.14% | 100.00% | 10.81 | 27 | 2 | 27 | 6 |
| Computer and Tech | 63.62% | 100.00% | 10.16 | 57 | 5 | 63 | 8 |
| Oils and Energy | 60.68% | 100.00% | 9.93 | 29 | 9 | 18 | 22 |
| Basic Materials | 177.01% | 100.00% | 6.25 | 19 | 2 | 20 | 3 |
| Auto | – to + | 100.00% | 6.05 | 6 | 0 | 6 | 0 |
| Aerospace | -5.84% | 100.00% | 5.38 | 8 | 2 | 5 | 5 |
| Consumer Staples | 25.14% | 100.00% | 5.26 | 29 | 4 | 30 | 5 |
| Utilities | 1.01% | 100.00% | 5.15 | 30 | 10 | 27 | 16 |
| Medical | 14.94% | 100.00% | 4.21 | 34 | 9 | 36 | 11 |
| Business Service | 14.34% | 100.00% | 4.00 | 14 | 3 | 10 | 7 |
| Finance | 106.76% | 100.00% | 3.85 | 49 | 20 | 58 | 19 |
| Retail/Wholesale | 47.47% | 100.00% | 3.45 | 31 | 5 | 40 | 3 |
| Transportation | 43.66% | 100.00% | 2.44 | 7 | 1 | 7 | 2 |
| S&P | 46.54% | 100.00% | 6.67 | 375 | 76 | 380 | 120 |
Sales Surprises
- Sales Surprise ratio at 2.26, median surprise 1.25%, 65.0% of all firms do better than expected on top line.
- More firms report growing than shrinking revenues, ratio 3.35:1, 77.0% of all firms report higher revenues than a year ago.
- Revenue growth very healthy at 11.9% but still greatly lags earnings growth pointing to net margin expansion.
- Five sectors have median sales surprises over 2.0%, lead by Autos and Tech.
This is the same table that appeared last week since only five firms have already reported their second quarter results.
|
Sales Surprises
|
|||||||
|---|---|---|---|---|---|---|---|
| Sales Surprises | Yr/Yr Growth |
% Reported |
Surprise Median |
Sales Surp Pos |
Sales Surp Neg |
# Grow Pos |
# Grow Neg |
| Auto | 24.20% | 100.00% | 2.80 | 4 | 2 | 6 | 0 |
| Computer and Tech | 17.26% | 100.00% | 2.79 | 61 | 10 | 65 | 6 |
| Basic Materials | 19.87% | 100.00% | 2.69 | 18 | 5 | 20 | 3 |
| Consumer Discretionary | 6.13% | 100.00% | 2.17 | 28 | 6 | 30 | 4 |
| Industrial Products | 2.68% | 100.00% | 2.16 | 11 | 9 | 17 | 3 |
| Conglomerates | 0.05% | 100.00% | 1.92 | 5 | 3 | 6 | 3 |
| Business Service | 5.33% | 100.00% | 1.43 | 13 | 6 | 13 | 6 |
| Finance | 13.67% | 100.00% | 1.39 | 33 | 17 | 51 | 26 |
| Aerospace | -2.14% | 100.00% | 1.37 | 4 | 6 | 5 | 5 |
| Retail/Wholesale | 5.89% | 100.00% | 1.01 | 36 | 7 | 42 | 3 |
| Consumer Staples | 10.43% | 100.00% | 0.67 | 21 | 14 | 28 | 8 |
| Utilities | 1.58% | 100.00% | 0.56 | 20 | 22 | 24 | 18 |
| Medical | 11.72% | 100.00% | 0.47 | 31 | 16 | 38 | 9 |
| Oils and Energy | 35.01% | 100.00% | 0.45 | 24 | 16 | 26 | 14 |
| Transportation | 10.54% | 100.00% | 0.39 | 9 | 0 | 9 | 0 |
| Construction | -5.36% | 100.00% | 0.30 | 7 | 4 | 5 | 5 |
| S&P | 11.92% | 100.00% | 1.25 | 325 | 144 | 385 | 115 |
Expected Quarterly Growth: Total Net Income
- First Quarter total net income is 46.5% above what was reported in the first quarter of 2009, down from 104.0% growth in the fourth quarter (mostly financials going from loss to profit).
- Excluding Financials year over year growth accelerates to 37.2% from 12.4% in fourth quarter. Growth excluding financials expected to be 11.9% in 2Q, 18.5% in 3Q.
- Growth expected to slow to 22.5% in the second quarter, slow to 18.1% in 3Q.
- Autos expected swing from the red into the black, Construction profits expected to rise 922.3% in 2Q. Materials and Energy expected to post growth of over 65%.
- Three sectors now expected to earn less than they did a year ago, nine sectors to see double digit gains.
|
Quarterly Growth: Total Net Income Expected
|
|||||
|---|---|---|---|---|---|
| Income Growth | Sequential Q3/Q2 E | Sequential Q2/Q1 A | Year over Year 2Q 10 E |
Year over Year 3Q 10 E |
Year over Year 1Q 10 A |
| Auto | -18.73% | -23.31% | – to + | 8.77% | – to + |
| Construction | 9.93% | 110.05% | 922.26% | 1826.41% | – to + |
| Basic Materials | -3.17% | -12.47% | 85.18% | 36.80% | 177.01% |
| Oils and Energy | 6.78% | 0.65% | 66.30% | 39.95% | 60.68% |
| Transportation | 7.44% | 23.58% | 47.56% | 40.10% | 36.74% |
| Computer and Tech | 11.67% | 0.59% | 38.02% | 39.56% | 63.05% |
| Industrial Products | 1.68% | 40.31% | 36.46% | 16.05% | 46.71% |
| Retail/Wholesale | -4.84% | -13.36% | 23.41% | 0.96% | 19.33% |
| Business Service | 5.84% | 4.19% | 17.96% | 16.65% | 13.85% |
| Finance | 4.26% | -17.43% | 17.62% | 17.47% | 106.76% |
| Medical | 2.99% | -5.90% | 7.90% | 6.50% | 14.94% |
| Consumer Staples | 7.66% | 9.47% | 4.66% | 7.49% | 24.81% |
| Consumer Discretionary | 8.23% | -3.05% | 0.83% | -4.37% | 31.71% |
| Utilities | 28.39% | -13.47% | -0.98% | 4.11% | 1.01% |
| Aerospace | 2.73% | 12.26% | -7.11% | 144.29% | -5.84% |
| Conglomerates | 4.17% | 12.31% | -11.22% | -5.96% | 7.23% |
| S&P | 6.45% | -4.66% | 22.45% | 18.08% | 46.64% |
Quarterly Growth: Total Revenues
The table shows the growth expected for the second and third quarters.
- S&P 500 reported revenues up 11.9% year over year in 1Q, up from 6.6% revenue increase in the 4Q. Most of the revenue strength in the 4Q was from Financials, some of which actually posted negative revenue (not declining revenue, but a top line that was in the red) in the 4Q of 2008. In 1Q 14 sectors reporting positive revenue growth, and only Aerospace and Construction are reporting lower revenues than a year ago. In 4Q ten had positive revenue growth and six were negative.
- Revenue growth expected to slow significantly in second quarter to 8.34%, and a further slowdown to 5.25% growth now expected for the third quarter.
- Year over year revenue growth expected to slow for 14 sectors, accelerate for only Utilities and Industrials. Six sectors expected to post double digit sales growth in the second quarter, led by Energy and Tech.
|
Quarterly Growth: Total Revenues Expected
|
|||||
|---|---|---|---|---|---|
| Sales Growth | Sequential Q3/Q2 E | Sequential Q2/Q1 A | Year over Year 2Q 10 E |
Year over Year 3Q 10 E |
Year over Year 1Q 10 A |
| Oils and Energy | 2.45% | 0.00% | 21.00% | 20.50% | 35.01% |
| Computer and Tech | 4.68% | 0.88% | 15.48% | 19.20% | 16.58% |
| Auto | -0.80% | 0.00% | 14.68% | -1.38% | 24.20% |
| Basic Materials | 1.33% | 0.00% | 13.38% | 17.23% | 19.87% |
| Utilities | 7.47% | 0.00% | 12.51% | -1.22% | 1.58% |
| Transportation | 2.52% | 0.00% | 10.77% | 13.03% | 11.72% |
| Medical | 0.71% | 0.13% | 8.86% | 9.69% | 11.72% |
| Finance | -0.04% | 0.00% | 7.39% | -11.89% | 13.67% |
| Industrial Products | 0.54% | 5.26% | 4.33% | 16.62% | 2.68% |
| Business Service | 2.13% | 0.01% | 4.13% | 6.14% | 5.45% |
| Retail/Wholesale | -4.06% | -6.52% | 4.05% | -0.30% | 4.31% |
| Consumer Discretionary | 3.83% | 0.00% | 1.09% | 2.16% | 6.00% |
| Consumer Staples | 2.31% | -2.53% | -3.47% | -1.42% | 10.34% |
| Conglomerates | 1.10% | 0.00% | -3.83% | 3.86% | 0.05% |
| Aerospace | 1.07% | 0.00% | -5.82% | 3.47% | -2.14% |
| Construction | 3.24% | 0.00% | -7.01% | 6.79% | -4.60% |
| S&P | 1.28% | -0.85% | 8.34% | 5.25% | 11.94% |
Annual Total Net income growth
- Total S&P 500 Net Income in 2009 was 7.0% below 2008 levels, following 27.3% plunge in 2008.
- Total earnings for the S&P 500 expected to jump 34.7% in 2010, 19.6% further in 2011.
- Earnings recovery to happen by mid 2011, full year 2011 earnings to be 8.9% above 2007 levels. In other words the recovery in earnings will occur far before the recovery in jobs as we are unlikely to return to 2007 job levels until 2013 at the earliest.
- Four sectors saw positive growth for 2009. In addition, Finance and Autos moving from a loss to a profit, while Construction sees much lower losses. Among the positive to positive growth rates, Staples lead with 6.29%.
- Autos, Finance, Basic Materials, and Tech expected to be earnings growth leaders in 2010. Construction expected to move from the red to the black. No sector expected to see earnings decline in 2010.
- Finance, Construction, Energy Materials and Autos expected to be 2011 growth leaders with over 30% growth.
- Despite strong growth in both 2010 and 2011, Energy earnings in 2011 expected to be 20.3% below 2008 levels.
|
Annual Total Net Income Growth
|
||||
|---|---|---|---|---|
| EPS Growth | 2008 | 2009 | 2010 | 2011 |
| Construction | + to – | – to – | – to + | 117.77% |
| Auto | + to – | – to + | 1444.41% | 32.31% |
| Finance | + to – | – to + | 307.57% | 33.14% |
| Basic Materials | -4.43% | -50.17% | 46.31% | 35.08% |
| Computer and Tech | 15.45% | -4.15% | 33.68% | 17.49% |
| Oils and Energy | 20.72% | -55.70% | 33.45% | 34.80% |
| Industrial Products | 5.39% | -36.71% | 25.72% | 26.60% |
| Transportation | 1.20% | -30.04% | 24.53% | 24.76% |
| Consumer Discretionary | 8.56% | -10.95% | 15.29% | 11.15% |
| Aerospace | 13.20% | -14.87% | 13.64% | 12.67% |
| Business Service | 24.80% | 1.08% | 12.95% | 15.78% |
| Retail/Wholesale | 1.48% | 2.89% | 12.78% | 13.04% |
| Consumer Staples | -11.65% | 6.33% | 10.60% | 11.11% |
| Medical | 9.32% | 1.88% | 5.77% | 8.88% |
| Utilities | -1.07% | -13.65% | 1.41% | 7.51% |
| Conglomerates | -10.96% | -23.88% | 0.96% | 5.04% |
| S&P | -27.29% | -6.98% | 34.72% | 19.56% |
Annual Total Revenue Growth
- Total S&P 500 Revenue in 2009 6.46% below 2008 levels
- Total revenues for the S&P 500 expected to rise 4.59% in 2010, 6.66% in 2011
- Given 11.9% revenue growth in first quarter, and 8.3% expectations for second quarter, implies slowdown in second half (or increases in full year estimates).
- Energy to lead 2010 revenue race, Tech and Materials to take silver and bronze, but Transports and Industrials have a chance to make it on to the medal stand.
- Looking out to 2011, Energy and Autos are the only sectors expected to see double digit revenue growth, although four other sectors expected to have revenue growth over 8%.
|
Annual Total Revenue Growth
|
||||
|---|---|---|---|---|
| Sales Growth | 2008 | 2009 | 2010 | 2011 |
| Oils and Energy | 24.40% | -34.17% | 24.01% | 15.74% |
| Computer and Tech | -21.92% | -5.13% | 13.08% | 8.37% |
| Basic Materials | 19.08% | -19.30% | 11.89% | 7.20% |
| Transportation | 34.02% | -13.65% | 11.56% | 8.51% |
| Industrial Products | 5.39% | -19.55% | 11.08% | 9.65% |
| Medical | 22.17% | 6.16% | 9.06% | 3.44% |
| Business Service | -1.28% | -2.03% | 6.26% | 5.86% |
| Retail/Wholesale | 21.81% | 2.70% | 4.93% | 5.02% |
| Utilities | 5.80% | -5.87% | 4.91% | 2.47% |
| Consumer Discretionary | 12.49% | -8.72% | 4.32% | 5.09% |
| Conglomerates | 6.32% | -13.19% | 2.08% | 2.32% |
| Auto | -8.23% | -21.36% | 1.98% | 10.96% |
| Construction | -14.10% | -15.92% | 1.56% | 9.64% |
| Aerospace | 4.53% | 6.30% | 1.29% | 5.88% |
| Consumer Staples | -8.35% | -1.59% | -2.79% | 4.14% |
| Finance | -19.46% | 21.25% | -18.92% | 3.47% |
| S&P | 4.52% | -6.46% | 4.59% | 6.66% |
Revisions: Earnings
The Zacks Revisions Ratio: 2010**
- Revisions ratio for full S&P 500 at 0.93, down from 1.19 last week, still a neutral reading.
- Industrials and Construction lead, but with very small total estimate change sample. Tech leads among large sectors.
- Sharp decline in revisions ratios mostly due to old estimate increases falling out of sample, not a flood of estimate cuts.
- Ratio of firms with rising to falling mean estimates at 0.93, down from 1.03, also a neutral reading.
- Total number of revisions (4 week total) down to 1,782 from 1,867 (-4.6%).
- Increases down to 859 from 1,020 (-15.8%), cuts up to 923 from 856 (7.8%).
- Total Revisions activity approaching seasonal low, will soar after 2Q earnings season starts in mid July.
|
The Zacks Revisions Ratio: 2010
|
|||||||
|---|---|---|---|---|---|---|---|
| Sector | %Ch Curr Fiscal Yr Est – 4 wks |
# Firms Up |
# Firms Down |
# Ests Up |
# Ests Down |
Revisions Ratio |
Firms up/down |
| Industrial Products | 1.58 | 11 | 6 | 46 | 15 | 3.07 | 1.83 |
| Construction | 3.39 | 7 | 2 | 13 | 5 | 2.60 | 3.50 |
| Computer and Tech | 0.77 | 33 | 25 | 227 | 90 | 2.52 | 1.32 |
| Transportation | 0.18 | 6 | 2 | 31 | 13 | 2.38 | 3.00 |
| Conglomerates | 0.34 | 5 | 3 | 9 | 4 | 2.25 | 1.67 |
| Business Service | 0.06 | 9 | 7 | 23 | 15 | 1.53 | 1.29 |
| Retail/Wholesale | 0.33 | 28 | 15 | 174 | 121 | 1.44 | 1.87 |
| Consumer Discretionary | -0.12 | 14 | 13 | 27 | 38 | 0.71 | 1.08 |
| Auto | 0.08 | 2 | 3 | 4 | 6 | 0.67 | 0.67 |
| Finance | 0.40 | 25 | 43 | 107 | 163 | 0.66 | 0.58 |
| Utilities | -0.12 | 18 | 16 | 24 | 40 | 0.60 | 1.13 |
| Basic Materials | -0.06 | 9 | 13 | 27 | 46 | 0.59 | 0.69 |
| Medical | 0.38 | 18 | 29 | 42 | 81 | 0.52 | 0.62 |
| Aerospace | -0.12 | 4 | 6 | 5 | 10 | 0.50 | 0.67 |
| Oils and Energy | 0.08 | 15 | 25 | 69 | 169 | 0.41 | 0.60 |
| Consumer Staples | -0.10 | 10 | 21 | 31 | 107 | 0.29 | 0.48 |
| S&P | 0.36 | 214 | 229 | 859 | 923 | 0.93 | 0.93 |
Revisions: Earnings
The Zacks Revisions Ratio: 2011**
- Revisions ratio for full S&P 500 at 0.81, down from 1.01, barely in neutral territory.
- Transportation and Aerospace have highest revisions ratios, small totals.
- Tech and Retail still strongest of major sectors.
- Seven sectors with positive revisions ratios, nine with ratios below 1.0.
- Staples and Energy all have more than 3 cuts for each increase.
- Ratio of firms with rising estimate to falling mean estimates at 0.72, down from 0.82. Bearish reading.
- Nine sectors have more firms with falling mean estimates that rising estimates.
- Total number of revisions (4 week total) at 1,683, down from 1,771 (-5.0%).
- Increases down to 751 from 890 (-59.9%) cuts rise to 932 from 881 (5.8%).
|
The Zacks Revisions Ratio: 2011
|
|||||||
|---|---|---|---|---|---|---|---|
| Sector | %Ch Next Fiscal Yr Est – 4 wks |
# Firms Up |
# Firms Down |
# Ests Up |
# Ests Down |
Revisions Ratio |
Firms up/down |
| Transportation | 1.48 | 6 | 2 | 32 | 6 | 5.33 | 3.00 |
| Aerospace | -0.17 | 3 | 7 | 14 | 5 | 2.80 | 0.43 |
| Computer and Tech | 0.20 | 36 | 29 | 182 | 103 | 1.77 | 1.24 |
| Retail/Wholesale | 0.09 | 23 | 20 | 170 | 119 | 1.43 | 1.15 |
| Industrial Products | 0.58 | 9 | 8 | 32 | 26 | 1.23 | 1.13 |
| Construction | 0.05 | 5 | 3 | 7 | 6 | 1.17 | 1.67 |
| Business Service | -0.05 | 8 | 9 | 20 | 18 | 1.11 | 0.89 |
| Auto | -0.33 | 1 | 4 | 4 | 5 | 0.80 | 0.25 |
| Consumer Discretionary | -0.01 | 14 | 14 | 23 | 35 | 0.66 | 1.00 |
| Finance | -0.07 | 27 | 37 | 85 | 142 | 0.60 | 0.73 |
| Utilities | 0.07 | 10 | 25 | 23 | 41 | 0.56 | 0.40 |
| Medical | -0.04 | 15 | 31 | 48 | 88 | 0.55 | 0.48 |
| Conglomerates | 0.08 | 4 | 4 | 6 | 11 | 0.55 | 1.00 |
| Basic Materials | -1.34 | 7 | 15 | 23 | 44 | 0.52 | 0.47 |
| Oils and Energy | -1.74 | 7 | 30 | 56 | 175 | 0.32 | 0.23 |
| Consumer Staples | -0.23 | 11 | 19 | 26 | 108 | 0.24 | 0.58 |
| S&P | -0.15 | 186 | 257 | 751 | 932 | 0.81 | 0.72 |
Total Income and Share
- S&P500 earned $545.9 billion in 2009, expected to earn $735.4 billion in 2010, $879.2 billion in 2011.
- Finance share of total earnings moves from 5.4% in 2009 to 16.3% in 2010, 18.2% in 2011, regains total earnings crown from Tech.
- Medical share of total earnings far exceeds market cap share (index weight), but earnings share expected to shrink from 17.5% in 2009 to 12.5% in 2011.
- Energy Market cap share also well below earnings share, and energy earnings share is growing. from 11.6% in 2009 to 13.0% in 2011.
- Market Cap shares of Construction, Transportation, Industrials and Business Service sectors far exceed both 2010 and 2011 earnings shares.
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Total Income and Share
|
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|---|---|---|---|---|---|---|---|
| Sector | Total Net Income $ 2009 |
Total Net Income $ 2010 |
Total Net Income $ 2011 |
% Total S&P Earn 2009 |
% Total S&P Earn 2010 |
% Total S&P Earn 2011 |
% Total S&P Mkt Cap |
| Computer and Tech | $93,689.66 | $125,242.01 | $147,149.43 | 17.16% | 17.03% | 16.74% | 18.37% |
| Finance | $29,489.73 | $120,191.12 | $160,017.07 | 5.40% | 16.34% | 18.20% | 16.24% |
| Medical | $95,445.74 | $100,952.65 | $109,921.76 | 17.49% | 13.73% | 12.50% | 10.95% |
| Oils and Energy | $63,273.81 | $84,436.76 | $113,822.43 | 11.59% | 11.48% | 12.95% | 10.55% |
| Retail/Wholesale | $51,728.34 | $58,340.74 | $65,946.61 | 9.48% | 7.93% | 7.50% | 8.41% |
| Consumer Staples | $47,010.23 | $51,993.25 | $57,769.16 | 8.61% | 7.07% | 6.57% | 7.13% |
| Utilities | $49,000.55 | $49,693.37 | $53,426.28 | 8.98% | 6.76% | 6.08% | 6.19% |
| Consumer Discretionary | $33,813.48 | $38,982.20 | $43,328.68 | 6.19% | 5.30% | 4.93% | 6.15% |
| Conglomerates | $25,077.90 | $25,318.98 | $26,595.03 | 4.59% | 3.44% | 3.02% | 3.57% |
| Basic Materials | $13,254.82 | $19,393.03 | $26,195.48 | 2.43% | 2.64% | 2.98% | 2.98% |
| Aerospace | $13,296.20 | $15,109.71 | $17,024.35 | 2.44% | 2.05% | 1.94% | 1.83% |
| Industrial Products | $10,610.77 | $13,339.42 | $16,888.04 | 1.94% | 1.81% | 1.92% | 2.10% |
| Business Service | $11,721.62 | $13,240.15 | $15,328.90 | 2.15% | 1.80% | 1.74% | 2.15% |
| Transportation | $8,281.80 | $10,313.61 | $12,867.48 | 1.52% | 1.40% | 1.46% | 1.87% |
| Auto | $480.11 | $7,414.86 | $9,810.74 | 0.09% | 1.01% | 1.12% | 0.93% |
| Construction | ($323.82) | $1,426.06 | $3,105.51 | -0.06% | 0.19% | 0.35% | 0.58% |
| S&P 500 | $545,850.92 | $735,387.93 | $879,196.95 | 100.00% | 100.00% | 100.00% | 100.00% |
P/E Ratios
- S&P 500 trading at 19.4x 2009 earnings, or an earnings yield of 5.15%.
- Trading at 14.4x 2010, 12.0x 2011 earnings, or earnings yields of 6.94% and 8.33%, respectively.
- Earnings Yields extremely attractive relative to 10 year T-Note rate of 3.20%.
- Medical has lowest P/E based on 2009 and 2010 earnings.
- Construction has highest P/E for 2010 and 2011.
- Auto and Finance high 2009 P/E’s to fall dramatically in 2010 and 2011.
- S&P 500 earned $57.52 in 2009, $77.50 in 2010 and $93.00 in 2011 expected.
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P/E Ratios
|
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|---|---|---|---|---|
| P/E | 2008 | 2009 | 2010 | 2011 |
| Medical | 12.3 | 12.1 | ||
