Posts filed under “Valuation”

Surprise! 2Q Sales Growth = +2.7%

click for larger graphic
sales revisions trend
Source: Merrill Lynch Research



We interrupt the upcoming economic apocalypse and market collapse for this surprising message. Earnings are being revised higher, as are Revenues as well.

Merrill Lynch, who tracks these sorts of things, notes that the latest revised expectations for Q2 are “1.3% higher than they were at the start of reporting season.” And ex-Energy, its closer to 3% (but I hate ex-anything),

Yes, these are only expectations, but history teaches us that the latter earnings revisions are far more accurate than the early “guesses.”

Perhaps the most surprising part of Q2 reporting season is that”Sales growth is no longer elusive.” Sales expectations as of early August are tracking ~1% higher than on July 1. The drivers are better than expected sales results for most sectors, with the soft spots being Materials, Staples and Technology.

Merrill now sees the consensus earnings expectations of a 2.7% year-over-year growth — with that +2.7% dominated by big gains in Financials.

If you were to look at the rest of the earnings growth without the biggest positive and negative contributors — Financials and Energy — than earnings are flat versus Q2 2012. (for a broader look, see the August 2 Factset Earnings Insight)

On the other hand, back out Financials and Energy, and Sales are expected to grow 3.4%. All sectors are expected to see gains of 2.7%.

Perhaps the most interesting data point in the report is that the 2.7% sales growth ex-Financials are likely to be up 1.7%. In other words, Revenues are finally rising.

The usual caveats apply: These are only estimates; the financial community has a tendency to skew too bullish; Analysts are less negative on sales than they were a quarter ago, but its just one quarter.And its worth noting that while EPS beats at 55% are above historical average of 53% (for MER’s coverage universe), sales beats at 52% are still below the 57% average.

But as Merrill points out, there have been four months of modest increases in sales forecasts.

If sales growth actually accelerates, we may be on to something . . .



Sales are making a comeback this quarter
Savita Subramanian
Equity and Quant Strategy
MLPF&S United States 05 August 2013

Category: Earnings, Valuation

Readying for Financial Bubbles to Burst

Readying for Financial Bubbles to Burst By Andy Xie Caixin 07.29.2013     Small troubles regarding trust products and the property market will be worth enduring if major economic gains can be made Some financial accidents, e.g., trust products defaulting, may occur in the coming months. Their impact on the real economy will be limited….Read More

Category: Psychology, Think Tank, Valuation

Five Bubbles?

The stock market has been choppy since mid-June, thanks in part to tapering talk and even more data that proves China is slowing down. MarketWatch’s Laura Mandaro discusses five bubbles investors need to watch

Five Bubbles Investors Need to Watch

Category: Markets, Sentiment, Valuation, Video

Earnings vs Equities Since 2009 Lows

S&P500 Earnings, Quarterly versus Price (Q1 2009- Present) Click to enlarge Source: Bloomberg Data   S&P500 Earnings, Trailing Year versus Price (1990 – Present) Source:  Dan Greenhaus, BTIG   Following last week’s discussion on narratives, I want to direct your attention to the charts above. One shows the quarterly recovery in earnings and prices since…Read More

Category: Earnings, Valuation

Technology & Retail Obsolescence

I forgot to publish my Bloomberg appearance this past week — here are two of the segments, mostly on retail and obsolescence:

Read More

Category: Media, Really, really bad calls, Retail, Technology, Valuation, Video

Housing Recovery Elusive for U.S. Homebuilders

Click to enlarge Source: Bloomberg     Interesting chart form Dave Wilson showing how elusive the U.S. housing market’s rebound  has been for the Homebuilders. Existing single-family homes sold at about the same pace in May as they did in January 2000, according to data compiled by the National Association of Realtors. New home sales…Read More

Category: Cycles, Real Estate, Valuation

S&P500 Index to Profits at all U.S. companies

Click to enlarge     I have to admit: I have never seen this ratio before. Standard & Poor’s 500 Index to profits at all U.S. companies. Its a price to earnings ratio of the main US stock market against ALL US earnings. According to this little used, odd ratio, Stocks are much cheaper after…Read More

Category: Earnings, Technical Analysis, Valuation

Inker: Explaining Equity Returns

Several comments in yesterday morning’s post sent me back to GMO’s archive to pull some of Ben Inker’s work. You should read yesterday morn’s commentary (here), than come back and read Inker. In particular, his piece Explaining Equity Returns. The five takeaways are as follows: 1) GDP growth and stock market returns do not have…Read More

Category: Investing, Valuation

Habits of the Bear, Bull Markets and Agency Issues

  “If you’re bullish and wrong, you usually have plenty of company. But if you’re bearish and wrong, it’s almost unforgivable.” -Bob Kargenian, TABR Capital Management, Barron’s DECEMBER 15, 2012     The above quote from Barron’s has been on my mind for a while. I thought of it again as the markets have made…Read More

Category: Investing, Psychology, Sentiment, Valuation

Equity Risk Premium is High (this is bullish)

  Last week, I posted the above chart from the NY Fed’s Liberty Street Economics. This morning on Squawk Box, David Tepper of Appaloosa discussed it — and his comments reversed the futures from negative to positive. Here is a brief explanation of what this chart — a compilation of 29 valuation models — means:…Read More

Category: Investing, Valuation