How Have Full-Year 2019 S&P 500 Earnings Estimates Changed?

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Includes: DMRL, EPS, IVV, PPLC, RSP, RVRS, RYARX, SDS, SFLA, SH, SPDN, SPLX, SPUU, SPXE, SPXL, SPXN, SPXS, SPXT, SPXU, SPXV, SPY, SSO, UPRO, USMC, VFINX, VOO
by: Brian Gilmartin, CFA
Summary

First, for the first time in a while, the number of "positive revisions" to S&P 500 estimates outnumber "negative revisions."

The Street has been negative - for some time - on EPS estimates until this week.

Of all 11 S&P 500 sectors, the Financial sector is expecting the strongest sector growth at 9% for full-year 2019.

First, for the first time in a while, the number of "positive revisions" to S&P 500 estimates outnumber "negative revisions." Here's the data and the graph:

The above is a spreadsheet kept weekly on the number of positive and negative S&P 500 EPS estimate revisions. What the reader wasn't shown, but will be displayed in mid-May or so, is that this week's "positive" revisions for the S&P 500 was the first positive number above 50% since 11/23/18.

The Street has been negative - for some time - on EPS estimates until this week.

That's a good sign.

Here is the graphical display of the same data, but the IBES graph data only goes back to early February 2019:

So, how have 2019 sector growth rates changed for the S&P 500?

Note how the overall S&P 500 expected earnings growth rate for 2019 was revised slightly lower since April 1, 2019, BUT several sectors have been revised higher, meaning that as of Friday, April 26, 2019, the expected sector earnings growth is higher today than it was on April 1, 2019.

Which sectors are looking for better earnings growth for full-year 2019 today than on April 1, 2019?

  • Energy
  • Financials
  • Health Care
  • Real Estate
  • Technology

Which sectors are expected to show faster earnings growth than the S&P 500 as a whole for 2019?

  • Financials at 9% expected growth for 2019.
  • Health Care at 5.7% expected growth for 2019.
  • Real Estate at 4% expected growth for 2019.

Gary Morrow (@garysmorrow), one of my favorite technicians, noted yesterday on Twitter that the BKX would likely close above its 200-day moving average since last September 2018, and on Friday, April 26th, 2019, the BKX did close above that key average:

Summary/conclusion: S&P 500 earnings data is getting more positive - the first week since late November 2018 where positive revisions outnumbered negative revisions by a substantial margin - is a big positive. Last night's post about "upside surprises" left out the raw data, but readers get the point. Clients remain overweight Financials, with Charles Schwab (NYSE:SCHW) and JPMorgan (NYSE:JPM) as the largest Financial holdings.

Of all 11 S&P 500 sectors, the Financial sector is expecting the strongest sector growth at 9% for full-year 2019.

I still think that Q1 '19 earnings will show 3%-4% growth against a very strong comp a year ago, by mid-May 2019.

Full-year 2019 S&P 500 earnings growth should be closer to high-single-digits at least (by year-end), but we'll know more by the summer.

Gary Morrow thinks Northern Trust (NASDAQ:NTRS) will work here. Northern is a global custodian bank headquartered in Chicago.

One client, who is a very long-term investor, has a cost basis in NTRS of $36 from May 2003.

Thank for reading.

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.