(Travelling day’s limited edition)
2012 surplus hits $231bn, more than 50% larger than a year earlier
Exports rose 14.1 per cent from a year earlier, the fastest in seven months and well above November’s 2.9 per cent pace. Imports increased 6 per cent in December from a year earlier after flatlining in November. Both figures outstripped most forecasts.
Shipments to the European Union rose 2.3% in December, the first gain since May, on demand from the U.K. and the Netherlands. Exports to the U.S., Canada, South Korea and India also accelerated.
This just as U.S. exports were starting to slow down.
For those who care about earnings estimates. FYI, 2013 bottom up estimates are currently $113.
How accurate is the bottom-up EPS estimate one year in advance?
Over the past 15 years, the average difference between the bottom-up EPS estimate one year prior to the end of that year and the final EPS number for that year has been +10.3%. Analysts overestimated the final value in ten of the fifteen years and underestimated the final value in the other five years. For the purposes of this analysis, the final EPS number for a year is the EPS number recorded three months after the end of each calendar year (March 31) to capture the actual annual EPS results reported by most companies during the fourth quarter earnings season (January through March).
However, this 10.3% average includes three years in which there were substantial differences between the bottom-up EPS estimate at the start of the year and the final EPS number: 2001 (+35.9%), 2008 (+53.4%), and 2009 (+27.4%). Using the median instead of the average, the median difference between the bottom-up EPS estimate one year prior to the end of that year and the final EPS number for that year has only been +5.5% over the past 15 years. (Factset)
Here’s something that analysts generally miss:
Last Wednesday, President Barack Obama signed into law legislation that extends by a year a 2012 tax benefit allowing companies to deduct 50% of their capital expenditures (CAPEX), significantly more than normal. (…) We estimate the extension will save companies nearly $23 billion in cash taxes for 2013.
(…) Companies are permitted to depreciate, for tax purposes, property plant and equipment acquired and placed into service during the year using a Modified Accelerated Cost Recovery System (MACRS). (…)
Exhibit 1 below shows the CAPEX for the 12 months ended 30 September for the five industries most likely to benefit from the bonus deprecation extension including utilities, energy, telecommunications and retail. These industries’ CAPEX totaled $426 billion, or 52% of $815 billion in last-12-month (LTM) CAPEX for all rated, non-financial companies.
For illustration, Exhibit 2 compares the estimated tax benefit (e.g., cash savings) with and without bonus depreciation in 2013. We used the LTM CAPEX as of 30 September 2012 for more than 1,100 public, non-financial rated companies. We assumed 75% of capital expenditures were eligible for bonus depreciation, a 60% election rate, an average asset life of 10 years (equal to a normal MACRS deprecation rate of 14.3%), a corporate tax rate of 35%, and that the company is subject to US federal income taxes. Without 50% bonus depreciation, the estimated tax benefit in 2013 would have been $41 billion (using MACRS). With 50% bonus depreciation, we estimate the benefit will be approximately 56% higher, or $64 billion.
Bonus depreciation is not a new benefit: prior to this current extension, President Obama in December 2010 signed a bill into law that allowed US companies to fully deduct 2011 capital expenditures, up from 50% previously. The rate reverted back to 50% in 2012 and would have gone back to the normal rates under MACRS in 2013.
U.S. HEALTH CARE
What’s wrong with American baby boomers?
What’s wrong with American health care spending?
Want more: 2012 – The Year In Healthcare Charts
The president will nominate Jacob Lew as Treasury secretary, elevating the White House chief of staff into the administration’s top economic post.
While Lew, 57, worked as a managing director for Citigroup from July 2006 until the end of 2008, he’s spent most of his career in government. He served as director of the Office of Management and Budget for both Obama and President Bill Clinton and was an aide to the late Tip O’Neill, former speaker of the U.S. House. (Bloomberg)
Here’s Grant Williams’ reaction:
How in the name of all that is remotely sensible can your leading candidate for the Treasury Secretary role have ‘thin’ financial markets experience? Now? After 2008? With all the problems facing the banking sector? Lew may well be an extremely smart guy; but surely, a man who
spent two years at Citigroup in his 50s after a career in government isn’t the smart choice. Presumably, however, the likes of Jamie Dimon or Lloyd Blankfein wouldn’t be quick to subject themselves to the confirmation process…
Boehner and staff must be ecstatic!