S&P 500 Profit Flips Negative for Q3
This slipped by quietly last week:
Standard & Poor's U.S. corporate earnings projections for Q3 has slipped from prior levels, and are now negative for the quarter. Earnings for the S&P 500 companies are expected to decline 2.5%. Lackluster results, especially from Consumer and Finance companies, led to this outcome.
On a year-over-year basis, the S&P 500 earnings declined 8.48% from Q3 2006, marking the first such negative quarter since 2001 (-24.2%). As recently as October, the consensus estimates were for a gain of 3.3%. Quarterly revenue is forecast to fall even further -- a decline of 4.1%.
Q4 numbers have also been scrubbed lower -- though not quite as thoroughly as Q3. Its almost as if the analysts don't yet accept Q3 as anything more than an aberration. Reuters is estimating Q4 S&P500 profits of +5.9%, which has slipped from growth expectations of 7.6% percent last week. In Q3, perhaps the one time massive $39 billion charge by GM is thought of as the reason for the poor quarter. If GM gets most of the blame, we do not have to consider the unholy trinity of problems in the Housing, Credit and Consumer sectors.
Speaking of which: In Q3, the big losers were Consumer companies, down 26% sequentially and 38.9% Y-Y. The Financial sector was down 33% Y-Y. Several sectors shown strength, notably, Health Care and Technology, at +12% and 15% respectively.
S&P reported Friday that "with 93% of the data in, third quarter operating earnings for the S&P 500 are preliminarily set at $21.08 per share, compared to $23.03 for the third-quarter of 2006."
For those of you who like to play in Excel, I uploaded the full database of S&P500 estimates via Standard & Poor's website: SP500EPSEST.XLS. Tables below . . .
>
Sector Performance 
S&P500 Quarterly History
>
Sources:
Download SP500EPSEST.XLS
Standard & Poors
Q3 Financials Sector Earnings Plunge 33.1%; S&P 500 Earnings Decline 8.48%
PR Newswire
S&P 500 Q3 Earnings Ex-Financials Up 1.6%
November 15, 2007: 12:20 PM EST
http://money.cnn.com/news/newsfeeds/articles/prnewswire/NYTH11115112007-1.htm
S&P 500 profit outlook for dims further
Justin Grant
Reuters, Nov 19, 2007 11:12 AM GMT136
http://www.reuters.com/article/marketsNews/idUSN1948798120071119
Tuesday, November 20, 2007 | 06:47 AM | Permalink
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Comments
Awesome! Not the slashed earnings, mind you, but that Political Calculations beat both Standard & Poor itself by hours (via PR Newswire - the CNN link above) and Reuters (by days) to the story!
S&P Slashes Earnings for the S&P 500
Not that sharp-eyed Big Picture comment readers were in the dark for very long!
Posted by: Ironman | Nov 20, 2007 8:05:45 AM
18 straight quarters of YOY profit gains - not too shabby.
What would this quarter's results look like if you took out the Financials & GM's big write down?
Posted by: bsneath | Nov 20, 2007 8:12:04 AM
Thanks for posting this - was just about to dig into. Financials have grown to 30% of nat'l income profits and 30% of the SP500. As you've pointed out if one backcasts the writedowns it's extremely non-pretty. Lost in all this noise are two critical things. First, non-financials profit growth has slowed and is negative YOY. Second, since '01 that growth is non-organic.
That word organic is critical - I use it in the sense of increased earnings resulting from increased profits based on revenue and bottom-line growth. In fact non-financials have had the biggest postwar surge ever but it's been a combination of no hiring, very limited investment and buybacks. It's time to look beyond the quarter and ask yourself what the prospects are - how to separate out the good from the bad. And that's not happening.
Consider:
WRFest - Performance is Everything: http://tinyurl.com/33t88z
Review the Bidding, Count the Cards: EPS Growth Rates: http://tinyurl.com/2bbumt
Think Like an Owner: http://tinyurl.com/33flfg
for backup and skeleton of an approach.
Posted by: dblwyo | Nov 20, 2007 8:25:08 AM
Per the S&P database, the primary difference btw. the (27.76%) in reported EPS & the (8.48%) in operating EPS is the GM writedown.
Posted by: bsneath | Nov 20, 2007 8:46:48 AM
What would this quarter would look like if substracted by 3.5%(yield enhancement) assuming that the shares buy back remain at 650 BillionUSD?
Posted by: Philippe | Nov 20, 2007 9:05:09 AM
Just a quick question. Is the updated spreadsheet only available for subscribers? Or can poor simpletons like me download it for free?
Posted by: Dhukka | Nov 20, 2007 9:42:53 AM
Barry, I can't believe you haven't commented on it yet, but the Goldman Sachs conference call from yesterday had some serious bombshells. They are predicting a 30% decline in home values in 8 bubble states, ~14% decline nationwide. They also predict a total of ~$150 billion in writedowns, which means $108 billion to go.
Posted by: Rusty | Nov 20, 2007 10:15:56 AM
Anyone can access this info regularly:
http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS
Posted by: Adam | Nov 20, 2007 10:27:07 AM
Barry,
Can you give me your thoughts on the difference between As Reported EPS vs EPS. In other words a portion of the difference between As Reported & EPS are earnings that never happened. Correct? The GM $39 Billion in EPS, at the end of the day, never occurred but that $39 number exist in the previous quarter EPS numbers.
Thanks for doing this blog.
Posted by: Steve | Nov 20, 2007 10:34:34 AM
