THE EARNINGS SHELL GAME
From David Rosenberg:
We are told repeatedly that the stock market has rallied because upon earnings season, a record share of companies are beating their estimates.
This is what is known as ‘fun with figures’. But you can’t fool all the people all the time.
When we look at our databases, we see that S&P 500 operating EPS for 2Q is now estimated to have come in around $13.94. Meanwhile, at the end of the second quarter, the consensus was sitting at $14.15; at the end of March, consensus estimates were at $14.84 and at the end of 2008, they were $19.92. So, where exactly was this “beat” in terms of earnings versus estimates? The second quarter came in 30% below what was being “projected” by Wall Street analysts at the end of 2008!
The third quarter has been cut already so many times that the hurdle is now $14.57. At the end of June, it was $15.05, on March 30, it was $16.68, and at the end of 2008, the third quarter estimate for this year was $21.11. So let’s get this straight — the S&P 500 has managed to advance 13% this year even though current quarter operating EPS has been pulled down by nearly 30% (and 45% since the end of September 2008). That would make Houdini blush. The year-over-year EPS growth expectation for 3Q swung from +32.3% at the end of 2008 to +4.5% on March 2009, to -5.7% at the end of June, to -8.7% currently. And the market is up 50% from where it was in March even though we had seen a 13 percentage point swing to the downside.
Source: Gluskin Sheff
how’s your expectations index following q2 announcements?
Hard to argue price action. Does it mean potentially more upside for the 3rd qtr earnings season? Dip buyers have been coming in, yesterday and futures drop have been erased with better than news again. A repeat of 2 weeks ago to run to new highs in Sept or sell on good news?
Gaius, still positive, but near-term declining. Analysts are catching up, but as of now we are likely looking at another quarter of “better than expected”. I’ll update it as we get closer to earnings season….
Hi TPC, what time zone is displayed under Real-time Stock Chat? Thanks.
It should show your time zone, but it is funny some times since people are writing from overseas as well….
Hi TPC, I am from Massachusetts, Eastern Time. Sep 1 2009, 2:28 PM TPC: not happening so far BUT it is ET 10:49 am as I am writing. It appears the last chat should be prior to 10:49 am.
Paul,
It’s not something I control unfortunately. I am seeing my correct time zone….
Thanks TPC, what’s your time zone?
Paul, it must be West Coast time because we are 3 hours behind you.
I am on the west coast….
Hi Dean, the articles are displayed in West Coast time BUT the Chats display some time zone I cannot figure out but it’s out of TPC’s control. For example-
Sep 1 2009, 3:04 PM TPC: we’ll see. my preliminary research says the estimates might be a bit optimistic this friday. the jobs news out of Europe last night was horrible…
Whereas TPC’s last reply in this article is displayed as
# 1 September 2009 at 7:58 AM
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