The S&P 500 constituents have all reported fourth quarter earnings. The following earnings results are reported on an even weighted operating earnings basis. Most earnings comparisons are on a current constituent basis. Earnings projections comparisons are based on the constituents in the index at the time of these projections. Some of the data used in previous articles is no longer available and therefore is not included.
Based on the even weighted operating earnings of the current constituents, fourth quarter earnings were 8.41 percent below the previous quarter and 4.23 percent below the same quarter of a year ago. The TTM earnings slipped 0.64 percent below the quarter before and the year over year TTM earnings were only 1.77 percent higher. Current projections and company earnings guidance make it look very likely lower year over year constituent earnings could continue through at least the first two quarters of 2016, but it seems probable that earnings problems could continue beyond that.
Based on the past even weighted operating earnings of the current constituents, the TTM earnings fell from the previous quarter for the first time since the second quarter TTM earnings of 2009 slipped further below the first quarters. Current projections for the first and second quarters are showing this trend is likely to continue in the coming two quarters. This is eerily similar to the collapse in TTM earnings that began after the third quarter in 2007.
Even though the fourth quarter’s earnings reports had just completed during the week, some companies have already begun reporting first quarter earnings. A look at the projections for the first quarter shows quarterly earnings projections continued to be in the free fall they have been in for nearly two years. The first quarter projections have fallen drastically over the past two months as they slumped 6.94 percent since Jan 21 and are 8.95 percent below the Dec 31 projections.
Second quarter projections have slipped 2.75% in a little over a month and the 2016 full year projections have skidded nearly 10 percent lower since the first of the year. That steep fall in first half earnings projections has nearly completely wiped out the earlier optimistic growth projections for 2016. Optimism for the second half of 2016 still remains fairly high, but little appears to support an earnings turnaround happening this fast. It seems possible projections into the end of the year could begin to slip as these quarters draw nearer.
Comparing the current projections to the constituents in the S&P 500 in the first week ending in March during the past three years shows a concerning earnings trend. Earnings projections for the current year are 0.70 percent below the March 6, 2015 projections about the same time a year ago. They were 0.84 percent below the March 7, 2014 projections about the same time two years ago. They were only 6.99 percent above the March 1, 2013 projections about the same time three years ago.
The index finished March 1, 2013 at a 1518.20 closing price. Based on the valuations investors gave the index during a very strong earnings growth period and considering a 6.99 percent earnings growth on that closing price since; gives the index a value of 1624.32. The index appeared undervalued at that time, but earnings are seeing negative growth now. It seems likely current projections of forward earnings could continue to slip from these earlier highs.
There were 23 constituents that reported negative fourth quarter earnings, up from 17 in the third quarter. There are currently 26 expected to report earnings losses in the first quarter, but it seems possible others could be included once they have reported. The fourth quarter finished with 14 constituents with negative TTM earnings, three more than the quarter before. Three more are currently expected to begin reporting TTM earnings losses in the quarter ahead, but again it seems possible this number could finish higher.
The S&P 500 constituents are currently seeing the highest levels of quarterly and TTM earnings losses seen on the index since the numbers reporting losses began to elevate in 2008. The index has already shed many of the constituents that were reporting negative earnings. Several have begun to report negative earnings since being replaced. These high numbers of operating earnings losses are common during large market downturns as are the increases in constituent changes that replace those with earnings problems due to the large decreases in market cap value as their stock prices slide.
The S&P 500 saw two constituent changes in the past week. JAB Holding Company completed its acquisition of S&P 500 constituent Keurig Green Mountain Inc. and as a result S&P 400 constituent UDR Inc. (UDR) replaced Keurig Green Mountain in the S&P 500. The second saw S&P 500 constituent CONSOL Energy Inc. (CNX) moved to the S&P 400 due to its low market cap and American Water Works Company Inc. (AWK) replaced CONSOL in the S&P 500. Much like the constituent changes in 2015 due to low market caps, CONSOL lost a large part of it market cap during its recent downturn. CONSOLE finished Friday 78.32 percent below its June 6, 2014 close.
The S&P 400 saw a total of four constituent changes during the past week, including the two announced in the previous week. The data presented below includes these recent changes to the two indexes.
The following earnings update may not include all constituents that reported earnings during the past week and it could include some that reported earlier. Earnings were found for eight of the S&P 500 constituents that reported fourth quarter earnings. These constituents reported total earnings that were 54 cents lower than they reported the same quarter a year ago. This represented a 0.03 percent decrease of the index’s total trailing twelve month earnings from a week ago and an average decrease of 1.90 percent in the TTM earnings of those constituents. There were five constituents that reported earnings greater than the same quarter of a year ago and three reported earnings below the same quarter of a year ago. One of the constituents included in the earnings greater than those last year was counted as unchanged in an earlier update, but had earnings updated since. This resulted in an increase of 13 cents.
Earnings were found for four of the S&P 500 constituents that reported first quarter earnings. These constituents reported total earnings that were $1.03 higher than they reported the same quarter a year ago. This represented a 0.05 percent increase of the index’s total trailing twelve month earnings from a week ago and an average increase of 2.16 percent in the TTM earnings of those constituents. There were three constituents that reported earnings greater than the same quarter of a year ago and one reported earnings below the same quarter of a year ago.
Those that had already reported fourth quarter earnings prior to the current week saw a $2.55 reduction in first quarter earnings projections. There were 30 constituents with increases and 76 constituents saw decreases.
The S&P 500 constituents saw current year earnings projections decrease by $1.70 compared to a week ago. There were 57 constituents that saw their current year projection increase while 111 saw decreases. The index has a current year forward P/E of 18.73.
The constituents that saw fiscal year changes are reflected in this data and appeared to adversely affect this week’s outcome. There were six constituents that reported their fiscal fourth quarter earnings with the past week’s first or fourth quarter results. As a result they changed current year earnings from 2015 to 2016 or 2016 to 2017. The change of fiscal year earnings resulted in earnings that were $3.44 higher than the projections in the just completed year. There were five that saw increases and one saw a decrease. There were two increases greater than one dollar, with the total of those two increases being $2.64. The lone decrease was only three cents lower.
Although the following data is not all earnings based, it is normally presented with weekly earnings data updates provide above. The data provided is earnings influenced so it seemed fitting to leave it attached to this report.
The S&P 500 saw 281 constituents that finished the week below their 200 DMA, compared to 327 a week ago. There were 311 constituents that finished the week either below their 200 DMA or less than one dollar above it, compared to 358 a week ago. There were 337 constituents that finished the week with a 200 DMA in decline compared to 346 a week ago.
The S&P 500 saw 323 constituents finish the week greater than ten percent below 52 week highs, compared to 360 a week ago. Even after a very large rebound in stock prices, there were still 194 constituents 20 percent or greater below 52 week highs. There are five constituents that finished the week less than five percent from 52 week lows, compared to three a week ago. There were 25 constituents that saw new 52 week highs while five constituents reached new 52 week lows during the week. The stocks that reached 52 week highs finished the week with an average P/E of 20.67. What is interesting is these constituents at highs have a current year forward P/E of 20.98, showing expected earnings deterioration. The average even weighted TTM P/E of the index increased with the index price and the week’s poor reported earnings to 19.19. The index is again moving into historically high TTM P/E levels with forward earnings projections that do not appear to support this move higher.
There were 226 of the S&P 400 constituents that finished Friday beneath their 200 DMA, compared to 281 a week ago. The index finished Friday with 259 constituents either below or less than one dollar above their 200 DMA, compared to 300 a week ago. There were 275 constituents that had a 200 DMA in decline, compared to 261 a week ago.
There were 280 of the S&P 400 constituents that finished the week greater than 10 percent below 52 week highs, compared to 307 a week ago. There are 178 in excess of 20 percent below 52 week highs. There were three constituents that finished the week less than five percent from 52 week lows, compared to four a week ago. The mid-caps saw 31 constituents reach new 52 week highs while three fell to new 52 week lows during the past week. The S&P 400 finished the week with an average TTM P/E of 19.68. It has a current year forward P/E of 18.43
Disclosure: Ron had no investments in GMCR, UDR, CNX or AWK. He is currently about 53 percent invested long in stocks and reduced his investment level during the past week.
Disclaimer: The earnings data and estimates provided above were gathered from many sources, including the data available in earnings reports and on company websites. Although it is believed to be accurate and is often verified by more than one source, even the information provided in earnings reports is subject to change, so it cannot be guaranteed as accurate or timely. It is meant only for comparison purposes.
The opinions expressed by Ron are his own and may or may not reflect those of byteclay.com. This article is not intended to provide investment advice; but instead to provoke thought about investment possibilities. Acting on the information provided is at your own risk. You are urged to do your own research, and where appropriate, seek professional investment advice before acting on any information contained in these articles.