Views
3 years ago

March 22, 2005 - Dr. Ed Yardeni's Economics Network

March 22, 2005 - Dr. Ed Yardeni's Economics Network

S&P 500. Our Earnings

S&P 500. Our Earnings Month shows how all these data are derived using our Earnings Squiggles charting methodology. 4 Looking at the forward earnings of the 10 sectors from 1997 through March 2005, here is what I find (Figures 12, 13, 14, and 15): 1) The best short-term momentum is in Energy, Materials, and Information Technology. All three are rising faster than the forward earnings of the S&P 500. Energy has been nearly vertical since early 2004. Materials has been outpacing the S&P 500 since mid- 2003. Information Technology recovered smartly in 2003 through mid-2004, but then forward earnings stalled. In the past few months, it’s back to the races for IT. 2) Keeping pace with S&P 500 forward earnings in recent months are Consumer Staples, Industrials, and Utilities. 3) Losing momentum in recent months are Financials, Health Care, Consumer Discretionary, and Telecommunications Services. I believe this pattern is broadly consistent with my globalization theme. The sectors that have the most global exposure are showing the best earnings momentum. The ones with the most domestic exposure are losing momentum. * * * 4 See http://www.yardeni.com/pub/em.pdf. Page 6 / March 22, 2005 / Investment Strategy Weekly OAK ASSOCIATES, ltd. www.oakassociates.com

Earnings are back on 7% long-term trendline. Growth rate might exceed trend growth this year. 108 93 78 63 48 33 18 Figure 1. - Forward Earnings - S&P 500 EARNINGS PER SHARE (ratio scale, dollars) S&P 500 Earnings Per Share* _______________________ Reported (4-quarter sum) Operating** (4-quarter sum) Forward*** 18 yardeni.com 3 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 3 7% 3/18 Q4 5% 108 93 78 63 48 33 I am raising my forward earnings targets to $80 and $86 for the ends of 2005 and 2006, respectively. (Previously used $77 and $82). Projecting that actual earnings will be up 12% and 6% in 2005 and 2006. * Growth paths are compounded monthly to yield 5% and 7% annually. ** Excludes write-offs. *** 52-week forward consensus expected S&P 500 operating earnings per share. Time-weighted average of current and next year’s consensus earnings estimates. Monthly through April 1994; weekly thereafter. Source: Standard & Poor’s Corporation and Thomson Financial. Figure 2. 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 S&P 500 EARNINGS PER SHARE: FORWARD & ACTUAL (dollars) S&P 500 Earnings Per Share ________________________ Forward Earnings* (through 3/18/05) Operating Earnings (4-quarter sum) Yardeni Forecasts WARNING _________ Options expensing likely to lower 2005 by $1.50 and 2006 by $2.50 yardeni.com 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 * 52-week forward consensus expected S&P 500 operating earnings per share. Time-weighted average of current and next year’s consensus earnings estimates. Monthly through April 1994; weekly thereafter. F = Ed Yardeni’s forecasts as of March 21, 2005. Source: Thomson Financial. F 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 Page 7 / March 22, 2005 / Investment Strategy Weekly OAK ASSOCIATES, ltd. www.oakassociates.com

Health Care - Dr. Ed Yardeni's Economics Network
Valuation: SVM-1 - Dr. Ed Yardeni's Economics Network
Brewers - Dr. Ed Yardeni's Economics Network
Earnings Month - Dr. Ed Yardeni's Economics Network
Surprise - Dr. Ed Yardeni's Economics Network
S&P 500: Financials - Dr. Ed Yardeni's Economics Network
Oil & Gas Refining & Marketing - Dr. Ed Yardeni's Economics Network
United Kingdom - Dr. Ed Yardeni's Economics Network
Chart Collection for Morning Briefing - Dr. Ed Yardeni's Economics ...
Yardeni Research - Dr. Ed Yardeni's Economics Network
Fed Watcher - Dr. Ed Yardeni's Economics Network
YRI Earned Income Proxy - Dr. Ed Yardeni's Economics Network
ECB Lending - Dr. Ed Yardeni's Economics Network
S&P 500 Industrials - Dr. Ed Yardeni's Economics Network
S&P 500 Materials - Dr. Ed Yardeni's Economics Network
S&P 500 Industry Briefing: Aluminum - Dr. Ed Yardeni's Economics ...
S&P 500 P/E & Risk On/Off - Dr. Ed Yardeni's Economics Network
S&P 500 Industry Briefing: Tobacco - Dr. Ed Yardeni's Economics ...
Employment - Dr. Ed Yardeni's Economics Network
Housing Starts - Dr. Ed Yardeni's Economics Network
Unemployment Claims - Dr. Ed Yardeni's Economics Network
Retail Sales - Dr. Ed Yardeni's Economics Network
Commodity Prices - Dr. Ed Yardeni's Economics Network
Relative Profit Margins - Dr. Ed Yardeni's Economics Network
S&P 500 Industry Briefing: Trucking - Dr. Ed Yardeni's Economics ...
Chart Collection for Morning Briefing - Dr. Ed Yardeni's Economics ...
Chart Collection for Morning Briefing - Dr. Ed Yardeni's Economics ...
Global Inflation Rates - Dr. Ed Yardeni's Economics Network
Weekly Leading Indicators - Dr. Ed Yardeni's Economics Network
Global Consumer Confidence - Dr. Ed Yardeni's Economics Network