It's earnings season...
$XLF $XLP $XLE
So far, 34 of 500 S&P 500 companies have reported fourth quarter results. Aggregate sales and earnings are up +4.6% and 10.3% respectively year-over-year. If this earnings growth holds, it would mark the first time S&P 500 aggregate earnings have grown for two consecutive quarters in almost two years.
Here’s the Earnings Season breakdown so far:
- Financials (XLF) SALES and EPS have gained +3.5% and +14.1% year-over-year, respectively
- Consumer Staples (XLP) SALES of -1.2% year-over-year are the laggards, so far
- Energy (XLE) companies (35 of 500 in the S&P 500) are expected to show anywhere between +250-350% year-over-year earnings growth... in Q1 2017 consensus has Energy earnings up +727% year-over-year
- Digging into the pop in Materials (XLB), Monsanto (MON) went from losing -$0.11/share in the prior year's first quarter to +$0.21/share in the first fiscal quarter of 2017.
U.S. Economy and Earnings Accelerating
#GrowthAccelerating #Earnings
Interestingly, but not surprisingly, the trend of earnings acceleration mirrors exactly the slowing then bottoming of the U.S. economy in the second half of 2016. In the third quarter, GDP was up +1.7% year-over-year growth (+40 bps versus the prior quarter). Prior to that, U.S. growth slowed for five consecutive quarters (from the peak of 3.3% in March 2015 to 1.3% in June 2016) before the trend finally flipped.
Sound familiar?
That's precisely what happened to earnings. In the second quarter of 2016, earnings had declined for five consecutive quarters, a streak not seen since the dark days of 2009. Now, it's looking like we'll have a second consecutive quarter of growth in the fourth quarter.
In other words, the U.S. economy and earnings have both bottomed out. "We have a real Sales and Earnings acceleration to go along with the big, top-down macro-economic, and behavioral data accelerations," writes Hedgeye CEO Keith McCullough in today's Early Look.
That's why we're bullish on the S&P 500.
