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Eye on Earnings Revisions

Lack of erosion in revision factor sent this group higher. Now we’ve got the lowest earnings expectations in at least 10 years on trough multiples. Be VERY selective.

These charts speak volumes. Yes, earnings revisions are bad, but the rate of change has stalled. The SECOND that this happened, the stocks ripped.

Even though we need to see revisions ease from here for another move in the group, now we’re looking at 12x earnings when the Street is looking for 12 month forward earnings to be down 4%. That’s the first time in over 10 years I can find a period where the Street is actually looking for down earnings. Pretty tempting at face value.

It’s near impossible to call the bottom here – as there are so many companies where that -4% decline will prove to be a pipe dream. But there are plenty of names that have been tossed aside, and I think will grow meaningfully better than expectations next year. RL, HIBB, UA, and PSS, to name a few.