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Earnings

Oct 07 2021

Valuations And The Earnings Recovery

  • Oct 7, 2021

Analysts at Standard & Poor’s will soon confirm what’s been known for several months: The earnings downturn associated with the COVID recession was the shallowest and shortest of any recession-related EPS decline.

Sep 24 2021

The EPS Recovery And "The Cycle"

  • Sep 24, 2021

In a couple of weeks, final second quarter EPS for the S&P 500 will confirm the fastest recovery ever from a recession-related earnings decline. That’s old news, and before it has even hit the tape. But we’ve had a sneak peak from the monthly, 12-month trailing EPS numbers published by MSCI for its USA Large Cap Index. Those figures showed that EPS exceeded their pre-COVID peak in May, and the latest reading (through August) is already 22% above the prior high! Simple trendline analysis suggests that EPS for U.S. Large Caps are likely higher today than they would have been in the absence of the COVID pandemic and hyper-stimulative response. 

 

Jul 30 2021

The 2021 EPS Rocket Ship

  • Jul 30, 2021

If you want to see a rocket ship, there’s no need to crane your neck upwards to see the latest exploits of our billionaire space cowboys. Rather, look to our earnings glidepath chart and marvel at the contrails of the 2021 full year operating earnings for the S&P 500.  

Jul 08 2021

Peak Earnings Yield A Rock-Bottom Forecast

  • Jul 8, 2021

At today’s 30.8x, the Peak P/E stands in the 99th percentile on all time horizons except the “New Era” (1995-to-date). Yet, that’s still five “handles” below the 35.8x all-time high recorded in December 1999. If that figure is matched, the S&P 500 will top 5,000. 

Jun 05 2021

The Earnings Recession Is History

  • Jun 5, 2021

We expected that the earnings recovery from the shortest-ever U.S. recession would be the fastest on record. Trailing figures for the MSCI USA Index now confirm this: Trailing EPS and Cash Flow Per Share have surged to new highs only 14 months after their March 2020 peaks. 

May 07 2021

“Surprise” Or “No Surprise?”

  • May 7, 2021

Navigating the investment landscape over the past year has been a journey full of surprises. No data other than “earnings surprises” can better demonstrate how unpredictable companies’ financial performance has become. 

Apr 21 2021

Valuing The Experiential Reopening

  • Apr 21, 2021

The onset of the COVID-19 pandemic in early 2020 brought a sudden halt to social gatherings, crowd events, and even personal contacts. Experiential business models were hardest hit by forced closures and lockdowns; cruise ships were forbidden to sail, restaurants and theme parks were closed, and air travel and hotel occupancy dwindled, all in an attempt to minimize personal interactions. The stocks of leisure services companies took a beating in March 2020, with Chart 1 documenting the virus’ impact on 34 large and midcap stocks representing this theme.

Apr 07 2021

Research Preview: The Experiential-Reopening Trade

  • Apr 7, 2021

A strong argument can be made that experiential consumer services was the economic sector hardest hit by the pandemic lockdown. Cruise ships were forbidden to sail, restaurants and theme parks were closed, and air travel and hotel occupancy dwindled—all in an attempt to minimize personal/public interaction. The stocks of experiential companies took a beating in March 2020.

Dec 30 2020

Looking Forward To 2021 Earnings

  • Dec 30, 2020

As we turn the page on 2020, a peek ahead to the S&P 500’s 2021 operating earnings is probably in order. You never know, earnings and valuations might be important again one day.

 

Oct 06 2020

Research Preview: 2021 Earnings Breakdown

  • Oct 6, 2020

Earnings estimates for 2021 are being projected above the records posted in 2018 and 2019. We ask the question, “How do we get there?” Here we present an introduction to this topic that we will examine at length and provide a full analysis in mid-October.

Oct 01 2020

European Banks: Buy Low…?

  • Oct 1, 2020

As steadfast believers that “price paid” is a major determinant of an investment’s risk and return, we snap to attention whenever we hear that an asset is selling at a multi-decade low.

Sep 05 2020

Earnings’ Lost Relevance

  • Sep 5, 2020

One characteristic of recent stock market action is extreme correlation. Chart 1 shows that during the sharp market decline following the COVID-19 arrival in the U.S. and the V-shaped upturn thereafter, the average correlation of S&P 500 constituents moved to near its highest level measured back to 1986.

Jul 16 2020

2020 Earnings And The Extremophile Market

  • Jul 16, 2020

As we wade into the waters of second-quarter earnings, muddied by economic shutdowns and suspended guidance, we thought it might be a good exercise to pull back from the “micro” of firm-level beats and misses and examine the “macro” picture that is the Great Earnings Washout of 2020.

 

Jun 04 2020

Small Cap Valuations: Zombies And Ragamuffins

  • Jun 4, 2020

Asset allocation decisions are fairly straightforward for groups of profitable and growing companies that fit nicely into a discounted cash flow model, but it is more difficult to describe the valuation of groups that include unprofitable companies.

Apr 17 2020

Mapping Out The Eventual Earnings Recovery

  • Apr 17, 2020

We view the coronavirus pandemic as the final straw that tipped an already vulnerable U.S. economy into recession, rather than the watershed event that will change the way we view growth, profitability, and even the nature of work itself. But even economic “optimists” like us need to recognize that the recovery back to last cycle’s earnings peak will be a long and grinding one. There’s a good chance that the four-quarter trailing S&P 500 GAAP Earnings Per Share cycle peak of $139.47 will not be exceeded until 2023 or 2024 (Chart 1).

Jan 08 2020

Are Earnings Set To “Gap” Higher?

  • Jan 8, 2020

We are troubled that the bullish optimism has spilled over into the 2020 estimates for S&P 500 earnings. Zero growth in 2020 is probably not a bad guess for NIPA figures, but S&P numbers don’t always follow suit.

Oct 18 2019

Giving Up The Ghost

  • Oct 18, 2019

The approach of Halloween brings thoughts of jack-o-lanterns, scary movies, and buckets full of candy. The season also marks the time when investors finally give up the ghost on the optimistic, even wishful, earnings forecasts made early in the year.

Mar 08 2019

So Long Tax Cuts… We Hardly Knew Ye

  • Mar 8, 2019

Our earnings waterfall analysis for the fourth quarter tells a story consistent with the entirety of 2018: earnings growth was fantastic, boosted by the twin drivers of strong sales growth and a lower corporate tax rate. Chart 1 spotlights the quarter’s tally, which produced a healthy sales growth number despite some economic weakening.

Feb 15 2019

2019 Earnings: Don't Bet On 6%

  • Feb 15, 2019

Currently, the collective intelligence of Wall Street is predicting 6% S&P 500 EPS growth in 2019. It’s also the 61-year average annual growth rate for the index, so how wrong could it be?

Dec 07 2018

Earnings Releases Cause Surge In Price Volatility

  • Dec 7, 2018

Three years ago, we did a series of studies looking at price reactions to corporate earnings releases (ER) and we found that, since 2007, price movement has become more dramatic on ER days.

Sep 21 2018

Second Quarter Earnings Waterfall

  • Sep 21, 2018

The S&P 500 reported blockbuster earnings growth again in the second quarter of 2018. With the corporate tax cut boosting profits this year, we were curious to know how much of the improvement was tax driven and how much was due to the exceptionally strong economy.

Jun 07 2018

Cycles And Taxes And GICS, Oh My!

  • Jun 7, 2018

Analyzing quarterly financial results and developing insights about upcoming periods is always difficult, but the first quarter of 2018 was unusually complicated.

May 05 2018

Earnings Soar While Liquidity Circles The Drain

  • May 5, 2018

Question: How can you be cautious on the stock market with recent earnings results so spectacular?

Dec 07 2017

The “Gap” Is Gone. Now What?

  • Dec 7, 2017

In Q3, the CBO’s Nominal Output Gap swung to positive for the first time since the last business cycle peak. This type of move has historically meant the cyclical peak in profit margins is close at hand.

Jun 07 2017

Emerging Markets: Fundamental Diffusion Indicators

  • Jun 7, 2017

Within EM, more robust growth is being exhibited by: 1) firms in Emerging Europe; 2) companies in Energy, Materials, and Financials; and, 3) larger cap companies.

Jun 07 2017

Earnings Momentum

  • Jun 7, 2017

The two-month Up/Down Ratio for Q1 results shows a reading of 1.48. Like the quarter before, an excellent “one-month” figure has been dragged down by a second month’s results.

May 05 2017

How To (Almost) Double Your Money In Under Ten Years

  • May 5, 2017

Buying the S&P 500 on one of the worst possible days in history ultimately yielded a total return of +87.4% (+6.8% annualized) through the end of April 2017...darn, sounds like an advert for Vanguard!

Feb 09 2017

Signs Of Improving Earnings & Sales

  • Feb 9, 2017

Growth Is Re-emerging: A recurring theme in recent Leuthold Group research is the apparent turn in corporate profits and a general improvement in business results. To monitor corporate sales/earnings trends, we measure the number of companies reporting higher quarterly sales and earnings than a year ago, versus companies reporting lower sales and earnings.

Jan 18 2017

An Earnings Bottom...What's Next?

  • Jan 18, 2017

It seems like it’s been ages since investors have been able to get excited about earnings growth, although our October 21st “Chart of the Week” showed that the S&P 500’s current earnings slump has been unremarkable in both depth and duration.

 

Jan 07 2017

Impact Of Lower Corporate Tax Rate

  • Jan 7, 2017

A stock market wild card in 2017 is the potential for a significant reduction in the corporate tax rate. President-elect Trump’s desire to lower corporate taxes, if implemented, would have multifaceted impacts on businesses.

Dec 07 2016

Calendar Effect On Earnings-Release Day Price Movement

  • Dec 7, 2016

Earnings season is not only important for fundamental investors, it can be equally so for quant managers. For quants that incorporate fundamental data, like us, historical trends and changes in consensus estimates may weigh heavily on model output.

Nov 05 2016

Earnings-Release Price Movement Among Sectors/Industries

  • Nov 5, 2016

Earnings season is not only important for fundamental investors, it can be equally so for quant managers. For quants that incorporate fundamental data, like us, historical trends and changes in consensus estimates may weigh heavily on model output.

Nov 05 2016

Four Thousand Companies Can’t Be Wrong!

  • Nov 5, 2016

Scott Opsal’s “Chart of the Week” in mid-October suggested the seven-quarter S&P 500 earnings recession may have run its course.

Oct 20 2016

EPS Touching Bottom?

  • Oct 20, 2016

Early in the third quarter earnings season, S&P 500 companies are providing a glimmer of hope that the long earnings recession may be ending. 

Jun 17 2016

Inflation Remains Largely In Line With Expectations

  • Jun 17, 2016

The latest jobs report disappointed but we think it’s a short term aberration as other data still point to a healthy job market. Some of the key market-based inflation drivers, however, have reversed course a bit in the last couple weeks. Patience is still the right strategy.

 

Jun 07 2016

Taking Earnings At Face Value

  • Jun 7, 2016

We’ve said before that one of Wall Street’s great inventions is the “forward operating earnings” estimate for the S&P 500, because it results in a P/E ratio that invariably sounds reasonable (if not outright cheap). But this already-misleading EPS metric has become even more so in recent years because of the proliferation of non-GAAP “adjusted EPS” reporting practices.

May 18 2016

Inflation Exceeded Expectations In April

  • May 18, 2016

Inflation exceeded expectations in April. The more durable inflation measures such as wage inflation are also improving. We characterize the recent improvement in inflation as a relief from the threat of deflation but still quite far from being a catalyst for run-away inflation.

 

Apr 15 2016

Inflation-Patience Recommended

  • Apr 15, 2016

Inflation missed expectations in March.  The three key inflation drivers this year - oil, the Dollar and the Chinese yuan, are all going in the right direction.  The risk of being too early on the inflation call far outweighs the risk of being too late.  Patience is still recommended.

 

Apr 07 2016

Earnings Momentum

  • Apr 7, 2016

The final month of 2015 earnings reports registered an Up/Down Ratio of 1.07. Once again, we have to go back to the dark days of 2009 to find a lower “three-month” ratio.

Mar 23 2016

Inflation Modestly Exceeds Expectations

  • Mar 23, 2016

Inflation met or modestly exceeded expectations. The three key drivers for inflation (oil, the Dollar and the Chinese yuan) continued to improve. But we are not rushing to declare victory on disinflation. “Organic” inflation, such as sustained wage inflation, has been very elusive so far.