Earnings have been better than expected across the board, but are still down enormously from last year. Including the skewed financial earnings the S&P 500 EPS is down about 10% year to date. Ex-financials EPS is down 23%. Funny how you don’t see those “ex-financials” comparisons on CNBC when they skew the numbers in a positive way. S&P 500 net income is set to come in 25% lower than last year. The 2009 average analyst estimate is the same as it was last week at $60. I still think this is far too high. My estimate is still calling for roughly $50.
My proprietary expectation ratio is improved substantially this week. This is an excellent long-term sign. The financials have severely skewed the data to the upside which is why I am getting such a large uptick in the ER data so it will be interesting to see how these numbers change as we get into Q2 and Q3. This is a great barometer of analyst expectations and is a clear sign that the estimates are coming much more in-line with actual results.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.