92% of S&P 500 companies have now reported
Q1 earnings. According to Standard & Poors GAAP earnings for the
last 12 months are just $99.18.
That is down 6.4% from peak
earnings, which were posted after the third quarter of 2014. That is
also down 1% from the earnings number posted all the way back at the end
of 2013, which means that earnings have not grown since January of
2014.
Despite no earnings growth since January of 2014, the
S&P 500 is up 15% since then. It has moved from an already high
multiple of 18.5x to an even higher multiple of 21.5x.
A few notes:
–S&P’s
numbers are “per share” which means that they factor in the effect of
buybacks. So this divergence can’t be explained by corporate actions.
–It’s
true that earnings have been impacted by oil prices and exchange rates.
But if you own the S&P 500 you own oil fields and companies with
foreign operations, so the earnings power of your property has been
impaired by the environment.
–TTM earnings are expected to stay at
the $99 level through 3Q15 and then jump to end the year at $106.54.
Operating earnings are expected to stay at the $111 level and jump to
$116 at year end. This implies 31% and 18% earnings growth in Q4 for
GAAP and operating earnings respectively. When people talk about PE
multiples compared to forward earnings they are factoring in this
growth.
–That growth is expected to continue in 2016. EPS is
projected to be up 15-17% in 2016, reaching $133 per share. Take
analyst projections with a grain of salt though. At this point in 2014,
analysts expected 2015 earnings to be $137.
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