S&P 500 Earnings Update: S&P 500 Earnings Yield At Post-2008 Low

Brian Gilmartin, CFA profile picture
Brian Gilmartin, CFA
9.32K Followers

Summary

  • Since the "forward estimate" will comprise Q1 '20 through Q4 '20, the "forward estimate" starting January 1 '20 will simply be the current calendar 2020 S&P 500 EPS estimate and that is - per IBES by Refinitiv - $177.27.
  • Next week, when the new forward estimate is plugged in, some of the valuation metrics will look a bit better.
  • Many think the S&P 500 has risen too far, too fast since early October '19. The low level of the earnings yield supports that notion.

In prepping to write this weekly update, the S&P 500's "forward earnings yield" at 5.28% is as low as I've seen it post 2008. Yes, that's a long time. The lowest I've seen it prior to this is the week of January 26th, 2018, when it closed the week at 5.35%. Yes, that week, when vol spiked dramatically and the S&P 500 corrected 8% in two weeks).

However, don't assume the same thing will happen this time around. Read further.

Well, next quarter is only 5 days away, and since the "forward estimate" will comprise Q1 '20 through Q4 '20, the "forward estimate" starting January 1 '20 will simply be the current calendar 2020 S&P 500 EPS estimate and that is - per IBES by Refinitiv - $177.27.

Here the current data (which was neglected to be published last week):

  • Fwd 4-qtr est: $171.15 vs. last week's $171.71
  • PE ratio: 19x
  • PEG ratio: 14x
  • S&P 500 earnings yield: 5.28% vs. last week's 5.33%
  • Y/Y growth of fwd est: +1.30% vs. last week's +1.26%

Trailing data:

  • TTM est: $163.77 this week vs. $163.87 last week
  • PE: 19.8x
  • PEG: 4.20x
  • S&P 500 earnings yield: 5.05% this week vs. 5.09% last week
  • Fwd est divided by TTM est: 4.51% vs. last week's 4.78%

Summary/conclusion: Next week, when the new forward estimate is plugged in, some of the valuation metrics will look a bit better. For instance, if we use the forward estimate of $177.27 divided by the S&P 500 (or the "forward S&P 500 earnings yield"), the forward earnings yield assuming no change in the S&P 500 next week is 5.47% and not the 5.28% noted this week.

The S&P 500 earnings yield peaked at 7.02% the week of December 21, 2018.

This week's S&P 500 earnings yield is pretty low

This article was written by

Brian Gilmartin, CFA profile picture
9.32K Followers
Brian Gilmartin, is a portfolio manager at Trinity Asset Management, a firm he founded in May, 1995, catering to individual investors and institutions that werent getting the attention and service deserved, from larger firms. Brian started in the business as a fixed-income / credit analyst, with a Chicago broker-dealer, and then worked at Stein Roe & Farnham in Chicago, from 1992 - 1995, before striking out on his own and managing equity and balanced accounts for clients. Brian has a BSBA (Finance) from Xavier University, Cincinnati, Ohio, (1982) and an MBA (Finance) from Loyola University, Chicago, January, 1985. The CFA was awarded in 1994. Brian has been fortunate enough to write for the TheStreet.com from 2000 to 2012, and then the WallStreet AllStars from August 2011, to Spring, 2012. Brian also wrote for Minyanville.com, and has been quoted in numerous publications including the Wall Street Journal.

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