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binve (< 20)

Estimated S&P 500 Q3 Earnings Growth Drifts Lower

Recs

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September 16, 2011 – Comments (3)

This very much goes in line with my last post: http://caps.fool.com/Blogs/yet-another-reason-why-i-dont/635157. Analyst estimates at major market tops tends to overshoot the acutal earnings and guidance tends to increase as the earnings are obviously not keeping pace. That is not what happened with the recent peak. Earnings estimates and earnings and the SPX basically all peaked together and have been decreasing for the last two months together.

Suddenly the analyst community got this one right? And the crowd also got it right? .... I don't buy it. (Barry has some interesting thoughts on that one here: http://www.thereformedbroker.com/2011/09/16/barry-on-sell-side-analysts-and-their-hilarious-forecasts/ ). The fact that nearly everyone is expecting and bracing for a double dip recession makes me think that fear is just way too overdone here.

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Estimated S&P 500 Q3 Earnings Growth Drifts Lower
DateFriday, September 16, 2011 at 12:24PM
http://www.bespokeinvest.com/thinkbig/2011/9/16/estimated-sp-500-q3-earnings-growth-drifts-lower.html

Below we highlight the change in the estimated year/year (y/y) earnings growth for the third quarter for the S&P 500 as the quarter has progressed.  As shown, earnings growth expectations for the index have steadily declined throughout the quarter, starting at 17.5% (y/y) and dropping down to 13.7% (y/y) as of today.  With the third quarter earnings season just a couple weeks away, investors are hoping that expectations have fallen too far too fast.

3 Comments – Post Your Own

#1) On September 16, 2011 at 1:42 PM, Frankydontfailme (27.45) wrote:

Yeah I Think you're right about this one. You don't think we willl make new highs though right?

 

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#2) On September 16, 2011 at 5:03 PM, davejh23 (< 20) wrote:

"The fact that nearly everyone is expecting and bracing for a double dip recession makes me think that fear is just way too overdone here."

Analysts obviously aren't bracing for a double dip recession.  While the chart shows a declining trend, it still shows extremely optimistic growth estimates.  I don't think anyone has ever predicted a recession based on 13.7% YoY EPS growth.  While some unusual pessimism has crept into the MSM in recent weeks, it only takes a couple days of positive movement for the media to change their tune (see today for example).  Based on the most recent data I've seen, margin useage is still near all time highs and mutual fund cash levels are still the lowest they've ever been.  Everyone still has year-end S&P estimates higher than current levels...even though estimates have been cut from record high levels.  To me, that sounds like almost nobody is really expecting a double dip recession. 

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#3) On September 16, 2011 at 11:50 PM, awallejr (80.10) wrote:

Nah market has turned because I said this:

It is quite possible that my proclamation of turning bearish could be viewed as a bullish sign for those contrarians out there

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