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Energy Stocks Lead While Materials Stocks Lag in 4Q Earnings

Feb 04, 2019

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All Data and Information as of 02/04/2019 Market Close

 

  • CY4Q2018 earnings season continues in full force this week with 92 companies in the S&P 500 Index set report their quarterly financials by Friday end of day. In last week’s trading, quarterly earnings results proved to be among the most notable catalysts to drive market sentiment.
     
  • So far this earnings season, 238 of the constituents in the S&P 500, or 47.6% of the US benchmark index, have reported CY4Q2018 financial results. As can be seen in the table below, S&P 500 companies to report financials this season have generated an average sales surprise of 0.56% and an average earnings surprise of 2.87%.

S&P 500 CY4Q2018 Earnings Release Sector Breakdown

  Average Sales Surprise Average EPS Surprise  Average Sales Growth Average Earnings Growth Number Reported Number in Index
S&P 500 CONS DISCRET INDEX -0.93% 6.05% 8.59% 27.35% 20 64
S&P 500 CONS STAPLES INDEX 0.57% 2.46% 5.97% 6.14% 15 33
S&P 500 INFO TECH INDEX 0.13% 2.14% 1.16% 6.04% 31 68
S&P 500 FINANCIALS INDEX -0.56% -0.91% 2.12% 14.52% 32 68
S&P 500 HEALTH CARE INDEX 1.46% 2.69% 7.18% 12.18% 47 62
S&P 500 INDUSTRIALS INDEX 1.59% 3.39% 6.09% 18.44% 47 69
S&P 500 ENERGY INDEX 1.23% 22.62% 9.03% 84.04% 10 30
S&P 500 UTILITIES INDEX -3.66% -0.65% 4.27% 1.83% 5 27
S&P 500 MATERIALS INDEX -2.61% -2.67% 0.89% -3.25% 14 25
S&P 500 COMM SVC INDEX 0.43% 4.00% 14.51% 20.96% 6 22
S&P 500 REAL ESTATE INDEX 0.13% -0.97% 2.77% 5.40% 11 32
Total S&P 500 Index 0.56% 2.87% 6.13% 14.62% 238 500

Source: Bloomberg

  • S&P 500 energy stocks are the best performing sector of stocks in the benchmark US index so far this earnings season both in terms of average sales/EPS surprise and average sales/earnings growth. So far this earnings season, 10 of the 33 energy stocks in the S&P 500, or 33.33% of the S&P 500 sector, have reported financial results.
     
  • By a wide margin, S&P 500 energy stocks have delivered the most robust EPS beats so far this earnings season. Energy stocks in the S&P 500 Index to report CY4Q2018 earnings have generated an aggregate EPS surprise of 22.62%. The next best performing S&P 500 sector in terms of aggregate EPS surprise, the consumer discretionary sector, has only generated an average EPS surprise of 6.05%. Additionally, energy stocks to report CY4Q2018 have generated an aggregate sales surprise of 1.23%, the third-highest aggregate sales surprise among S&P 500 sectors.
     
  • As can be seen in the table below, analysts expect EPS growth of –3.95% for S&P 500 energy stocks in the next 12 months -- are S&P 500 energy stocks poised for a missive earnings slowdown in 2019?

S&P 500 Sector Index Multiples, Yields, and Projected EPS Growth

  Fwd 12M P/E Ratio T12M P/E Ratio T12M EBIT/EV T12M FCF Yield FWD 12M EPS Growth (%) 3 Year Fwd EPS CAGR
S&P 500 CONS DISCRET INDEX 19.07x 22.25x 4.83% 4.25% 16.71% 14.25%
S&P 500 CONS STAPLES INDEX 17.63x 18.84x 5.62% 3.82% 6.89% 6.20%
S&P 500 INFO TECH INDEX 16.94x 18.87x 6.32% 5.61% 11.39% 10.03%
S&P 500 FINANCIALS INDEX 11.41x 13.10x 8.67% 8.22% 14.81% 12.28%
S&P 500 HEALTH CARE INDEX 15.44x 20.51x 4.44% 4.19% 32.81% 16.48%
S&P 500 INDUSTRIALS INDEX 15.15x 16.81x 5.47% 3.61% 10.96% 10.92%
S&P 500 ENERGY INDEX 17.26x 16.58x 5.94% 3.18% -3.95% 6.48%
S&P 500 UTILITIES INDEX 17.43x 17.79x 4.19% -1.52% 2.02% 4.12%
S&P 500 MATERIALS INDEX 15.01x 15.51x 6.28% 4.18% 3.34% 8.67%
S&P 500 COMM SVC INDEX 16.14x 19.04x 5.44% 4.21% 17.94% 13.32%

Source: Bloomberg

  • Materials stocks, on the other hand, are the worst performing group of stocks in the S&P 500 Index both in terms of sales/EPS surprise and sales/earnings growth so far this earnings season. So far this earnings season, 14 of the 25 S&P 500 materials stocks, or 56% of the sector, have reported their CY4Q2018 financial results.
     
  • S&P 500 materials stocks to report CY4Q2018 financials have generated an aggregate earnings slowdown of -3.25%, the worst aggregate earnings growth among S&P 500 sectors. S&P 500 materials stocks have also generated miniscule sales growth 0.89%, which is also the slowest growth among S&P 500 sectors.
     
  • Additionally, S&P 500 materials stocks have generated an average sales surprise of –2.61%, the second-worst among S&P 500 sectors, and an average EPS surprise of -2.67%, the worst among S&P 500 sectors.

S&P 500 Sector Index ROE Dupont Breakdown

  T12M ROE T12M Operating Margin T12M Net Profit Margin T12M Sales / Assets Assets / Equity
S&P 500 CONS DISCRET INDEX 26.15% 8.38% 5.84% 0.97x 4.50x
S&P 500 CONS STAPLES INDEX 25.26% 9.35% 6.79% 1.07x 3.30x
S&P 500 INFO TECH INDEX 31.98% 23.81% 19.48% 0.57x 2.82x
S&P 500 FINANCIALS INDEX 12.55% 22.69% 19.29% 0.08x 7.67x
S&P 500 HEALTH CARE INDEX 14.39% 9.01% 6.10% 0.78x 2.88x
S&P 500 INDUSTRIALS INDEX 20.45% 10.60% 7.19% 0.66x 4.16x
S&P 500 ENERGY INDEX 12.04% 8.91% 8.12% 0.73x 1.85x
S&P 500 UTILITIES INDEX 9.53% 16.77% 10.61% 0.22x 3.82x
S&P 500 MATERIALS INDEX 12.30% 12.06% 8.22% 0.53x 2.62x
S&P 500 COMM SVC INDEX 15.51% 18.91% 13.51% 0.45x 2.48x

Source: Bloomberg

 


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