With high quality consumer stocks dropping like flies, we thought it’d be prudent to take a look at earnings expectations by size/cap and the credence that the market is placing on hitting them.
The interesting call out for us is that the weighted average earnings growth expectation for apparel/footwear/department stores is 21%, and the market is placing a 17x p/e on those expectations. Note – we exclude Wal-Mart and Target from this analysis otherwise they’d dwarf the other 80 companies in the group collectively.
Looking at the median growth rate, however, we see that the Street is looking for about 15% -- a rate that has been remarkably steady for the past year. We’re looking at a more reasonable 14x p/e on those expectations.
Our simple conclusion…The big boys better deliver. They have a longer way to fall.