Jim “RevShark” DePorre (@RevShark) writes for TheStreet, Jim Cramer’s run (or former run) and formerly TheStreet.com. It certainly felt that way on Thursday, January 5, 2023, after strong unemployment claims rocked both stock and bond markets.
Interestingly, despite strong economic data on Thursday, the TLT actually ended the day higher.
Large banks and financial institutions will begin reporting this week. In fact, Friday January 13th is a big report card day, and this blog will publish a earnings preview later this weekend or early in the week.
Below is a list of the major banks and financial institutions scheduled to report on January 13th, according to Briefing.com. While this list has not run against the reports Refinitiv expects, Briefing.com has proven to be very reliable.
- Forward 4 Quarter Estimates (FFQE) jumped to $228.38 from last week’s $222.91. The new fourth quarter period is essentially a calendar 2023 estimate.
- Interestingly, FFQE is currently at $228.81, while the bottom-up calendar year estimate is still above $229 at $229.24. Consider all this.
- The forward-looking PE ratio is 17x, compared to 17.2x last week and 15.5x as of September 30, 2022.
- Despite Friday’s rise, the SP 500’s earnings yield closed Friday at 5.86%, its highest yield since 6% on November 4th. (Remember that the higher the EY, the more valuable the SP 500 is considered).
From a longer-term perspective, the SP 500 EPS estimate for 2022 and 2023 was expected to grow by 10% as of July 1, 2022. As of the first week of January 2023, 2022 is expected to end with SP 500 EPS growth of 6%, while 2023 has been downgraded to expected EPS growth of 4%.
These are sharp corrections over the past 26 weeks, and one has to wonder how much the current price discounts the earnings weakness.
Expected revenue and EP growth for Q4 2022:
Readers will be aware of Refinitiv’s report on expected sales and EPS growth for Q4 2022 for the SP 500, but the Excel spreadsheet is the work of this blog and shows the SP 500 Q1 2020 and beyond. Shows actual EPS and sales growth by 500 sectors. (Three columns for Q3 2022 results show trends in results for the entire quarter, and two columns for Q4 2222 expected results show changes over the past week.)
The purpose of the Excel spreadsheet is to show the incredible drop and subsequent growth of the SP 500 EPS and earnings for 2020 and 2021. After that, we can see that we will experience the next wave of comparisons, especially within the tech sector in 2022.
So what’s the point of all this?
While it’s hard to imagine CEOs and management being bullish about their 2023 EPS and earnings outlook given the Fed and slowing economic data, readers should know that we’re still in the midst of the impact of Covid and the difficult times ahead. (or very easy situations). Compare) Inside the SP 500 itself.
Comparing 2022 and 2021 technology is silly, with Alphabet (NASDAQ:) and Amazon (NASDAQ:) and Apple (NASDAQ:) still doing very well in their calendars for Q4 2022 and Q4 2021. We are facing tough comparisons.
Energy is just the opposite. Note that the expected energy EPS growth in Q4 2022 did not increase at all in the last 90 days of 2022. 60% growth is still pretty solid, but the positive correction has stopped and “comparative 2023 energy sector conditions will be much tougher (which is why I say I hate ‘percentage’ growth’). I’d rather look at dollar EPS numbers than year-over-year percentage growth or decline.)
The SP 500’s expected overall +4.1% revenue growth is the benchmark’s lowest expected year-over-year revenue growth since Q2 2020 or the woes of the pandemic.
Tech Q4 2022 EPS growth of -8.7%, expected earnings growth of -1% was the slowdown Jay Powell saw when he made a policy shift the week of Christmas 2019 Worse than Q2 of 2019, it’s the worst expected growth rate. This blog has since started tracking his quarterly data in 2012.
This technology could have the worst year-over-year earnings and EPS growth in 2010-11.
Summary/Conclusion: The December 2022 jobs report has beaten expectations on Friday 6th January, and a sharp contraction in December 2022 gives investors the first glimpse of a change in Fed policy, so the It is certain to bid on stocks and bonds. Interestingly, in CNBC’s Steve Leisman’s interview with his Fed President Raphael Bostic on Friday morning, Bostic noted that the Fed isn’t targeting wage inflation, but rather “demand.” was. Market reaction than the average hourly wage.
I have more work to do this weekend, so I’ll have to keep this blog post short.
The Fed government is adamant that there will be no Fed Funds rate cuts scheduled for 2023.
Remember, Powell changed very quickly in late 2018.
In this week’s market trivia column, markets outside the US are off to a very strong start to 2023. The KWEB (NYSE:) or Krane Shares China Internet ETF is up 14.47% in the last week alone after falling 17% in 2022. At some point in late October 2022, KWEB is down 47%-48%. quite a bounce. David Herro’s Oakmark International () fund rose 6% last week. European banks are starting to rise.
Take all this with a fair amount of skepticism. All raw earnings data is from his IBES data by Refinitiv, but an excel spreadsheet is the work of this blog, as is the valuation calculation. Past performance is no guarantee of future results. Capital markets can change rapidly, for better or worse. We will be back on Sundays for more.
thank you for reading.