Skip to comments.Sorry Bubblevision—Q1 Earnings Didn’t “Beat” But “Missed” By 15%
Posted on 06/07/2014 7:51:49 AM PDT by Lorianne
Nearly all (97.5%) of the S&P 500 companies have reported for the first quarter. EPS for the index companies stumbled rather spectacularly, though weather is being blamed for nearly all of it. Back on January 23, index EPS in Q1 was expected at around $29.40 (as reported). As of the latest update, EPS is only at $24.79, a 15% miss in just over four months. That means such massive over-optimism wasnt just reserved for the retail industry. And it wasnt just GDP that took everyone by surprise.
I think the major part of the problem is that the current state of business and the economy actually looks caught in between what would be considered normal growth and function and recession. As such, there are elements of both incorporated that muddy and muddle analysis, at least on the surface.
(Excerpt) Read more at davidstockmanscontracorner.com ...
Life sure was easier in the old days when we didn’t HAVE weather.
With an abundant flow of cheap money made available to businesses courtesy of a money-printing Fed through endless QE, a lot of companies have been buying back their own shares. This, of course, helps to improve their EPS (as earnings are divided by an ever decreasing number of shares).
If you remove the beneficial accounting effects of these share buybacks from the reported Q1 EPS for the S&P 500 the overall EPS figure would be even lower.
Excellent piece but theres one over riding consideration that seems to always be over looked in these sort of articles. Inflows. Every month, every day, funds are going into markets. Its inescapable. Between IRA’s and pensions both in the public and private sector the game is simply rigged that way. Any fund manager,and individual making these choices has the option of bonds or stocks. Bond yields,not returns over the past few years but yields, are at levels where they can never bring about the returns needed to fund a retirement. This is about math.
Also, there are lots of buyers gravitating towards dividend paying stocks for their higher yields who are . As long as interest rates remain low, there will be demand for such stocks.
those stocks don’t really move averages. Indexes like the utility index.
“those stocks dont really move averages.”
Not sure what you are getting at. I never said anything about “averages” nor made any suggestions relative to this. That is another topic altogether. I was responding to your comment in regards to “Inflows. Every month, every day, funds are going into markets. Its inescapable.” I don’t believe you mentioned averages either.
the article is about averages. averages reflect valuations. earnings multiples reflect valuations.even with little wage inflation there are too many dollars (and other currencies) chasing stocks.
“even with little wage inflation there are too many dollars (and other currencies) chasing stocks”
Agree, and “chasing” is exactly the right word. Fed policy has severely distored the market IMO.
Typo alert. Make that “distorted”.