71% of S&P 500 companies have reported. Revenues growth ex-financials is only 2% over a depressed 2008 Q4. To put this in proper perspective, Q4 GDP was up 5.7% SAAR but it was only up 0.8% YoY. The GDP deflator rose 0.7% YoY so current $ GDP is up merely 1.5%. David Rosenberg:
After a busy week of reporting, the fourth quarter earnings growth rate remained at 206% YoY (comprising nearly 65% of S&P 500 companies). Excluding the Financials sector, earnings inched up, to 16% from the previous week’s 15% tally.
Nearly three quarters of firms have beat analyst expectations and on average companies are beating expectations by 13%. (…) Revenues, on aggregate, are up 7.0% YoY, unchanged from last week as well. Once Financials are stripped out, the results are less impressive but at least in positive terrain, with YoY growth at 2% (again unchanged).
Q4 S&P 500 EPS are now forecast to come in at $17.33 (operating) for a 2009 total of $57.03. The market is thus selling at 18.5x trailing eps which, according to the Rule of 20 is only 3% above fair value using 2% inflation (see also on valuation US EQUITIES VALUATION ANALYSIS: DUCK, YOU (HAPPY) SUCKERS!.
We also saw more companies issue Q1 guidance last week — 53% of the universe thus far have issued negative guidance versus 52% in Q4 and 40% had positive EPS announcements (versus 40% in Q4). So, this is roughly in-line with Q4 pre-announcements. Analysts expect another great quarter for Q1, with 38% earnings growth — unlike a year ago when “green shoots” provided an upside surprise, today’s market has hefty expectations to live up to.
Q1 2010 eps are now forecast at $17.16 which would had $7 to trailing eps given Q1 2009 eps of only $10.11. This would bring trailing eps to $64. To me, this is the more appropriate basis to calculate PEs. The PE on trailing 12 month eps is thus 16.5x. Unless inflation (real or expected) rises to more than 4%, equities are not expensive at current levels.
