Monday Morning Minute 111317
THE WEEK AHEAD
Producer, Consumer, Import, and Export prices are in focus this week as we recap third-quarter earnings and look down the road towards future earnings seasons.
According to FactSet, for the third quarter, companies have reported earnings growth of 5.9% and sales growth of 5.8%. In addition to these impressive gains, more companies are beating earnings per share and revenue estimates than average. For example:
Of the companies that have reported, 74% have reported EPS above the mean EPS estimate. That 74% figure is above both the 1-year (71%) and 5-year average (69%). At the sector level, Technology (90%) has the highest percentage of EPS beats, while Utilities (50%) and Telecom (50%) have the lowest.
Of the companies that have reported, 66% have reported revenue above the mean revenue estimate. That 66% figure is above both the 1-year (61%) and 5-year average (55%). At the sector level, Technology (81%) has the highest percentage of revenue beats, while Utilities (21%) has the lowest.
With regard to valuation, the forward 12-month P/E ratio is 18.0. This figure is above both the 5-year (15.7) and 10-year average (14.1). Since the start of the fourth quarter, the price of the S&P 500 index has increased by 2.4%, while the forward 12-month estimate has increased 1.1%.
See graph below.
Looking into the future, the prospects for growth look promising. The street currently expects earnings to jump to double-digit levels well into next year:
4Q2017: earnings growth of 10.4%, revenue growth of 6.2%
CY2017: earnings growth of 9.5%, revenue growth of 6.1%
1Q2018: earnings growth of 10.6%, revenue growth of 6.4%
2Q2018: earnings growth of 10.2%, revenue growth of 6.3%
CY2018: earnings growth of 11.0%, revenue growth of 5.2%
If past is prologue we would expect next year’s forecasts to come down as actual results come in.
ECONOMIC DATA THIS WEEK
|Monday, Nov 13:||No Economic Data|
|Tuesday, Nov 14:||PPI Final Demand M/M||Oct||0.1%||0.4%|
|PPI Ex Food and Energy M/M||Oct||0.2%||0.4%|
|PPI Ex Food, Energy, Trade M/M||Oct||—||0.2%|
|PPI Final Demand Y/Y||Oct||2.5%||2.6%|
|PPI Ex Food and Energy Y/Y||Oct||2.2%||2.2%|
|PPI Ex Food, Energy. Trade Y/Y||Oct||—||2.1%|
|Wednesday, Nov 15:||CPI M/M||Oct||0.1%||0.5%|
|CPI Ex Food and Energy M/M||Oct||0.2%||0.1%|
|CPI Ex Food and Energy Y/Y||Oct||1.7%||1.7%|
|Retail Sales Advance M/M||Oct||0.1%||1.6%|
|Retail Sales Ex Auto M/M||Oct||0.2%||1.0%|
|Retail Sales Ex Auto and Gas||Oct||0.3%||0.5%|
|Empire State Manufacturing Survey||Nov||25.8||30.2|
|Thursday, Nov 16:||Weekly Jobless Claims||Nov 11||—||239K|
|Philadelphia Fed Business Outlook||Nov||24.0||27.9|
|Industrial Production M/M||Oct||0.5%||0.3%|
|Import Price Index M/M||Oct||0.3%||0.7%|
|Import Price Index Y/Y||Oct||—||2.7%|
|Export Price Index M/M||Oct||0.4%||0.8%|
|Export Price Index Y/Y||Oct||—||2.9%|
|NAHB Housing Market Index||Nov||68||68|
|Friday, Nov 17:||Housing Starts M/M||Oct||4.7%||-4.7%|
|Building Permits M/M||Oct||1.1%||-4.5%|
ASSET ALLOCATION PORTFOLIO POSTURE
Based on shorter-term expectations, the “tactical” allocation within portfolios is overweight stocks versus bonds.
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Kevin Caron, CFA, Senior Portfolio Manager
Chad Morganlander, Senior Portfolio Manager
Matthew Battipaglia, Portfolio Manager
Suzanne Ashley, Analyst
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