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S&P 500 Materials Stocks Are Notable Laggards so far in 4Q2018 Earnings Season

Feb 11, 2019

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All Data and Information as of 02/11/2019 Market Open

 

  • Today we are analyzing the results of S&P 500 earnings with 333 constituents, or 66.6% of the US benchmark index, having reported CY4Q2018 earnings as of market open on Monday. So far this earnings season, 59.0% of companies to report financials generated double-digit EPS growth or better in CY4Q2018 while 14 companies, or 4.2% of S&P 500 companies to report earnings, have reported EPS growth above 100%.
     
  • On an aggregate basis, the 333 S&P 500 companies to report CY4Q2018 earnings have generated sales growth of 6.57% and EPS growth of 14.31%. Additionally, S&P 500 companies to report CY4Q2018 financials thus far have generated an average sales beat of 0.84% and an average EPS beat of 3.38%.

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 0.09% 5.08% 6.65% 12.82% 34 64
S&P 500 CONS STAPLES INDEX 0.00% 3.08% 4.09% 3.36% 22 33
S&P 500 INFO TECH INDEX 0.12% 2.32% 0.97% 6.32% 47 68
S&P 500 FINANCIALS INDEX 0.40% -0.64% 2.53% 13.93% 61 68
S&P 500 HEALTH CARE INDEX 1.87% 1.63% 8.45% 11.34% 45 62
S&P 500 INDUSTRIALS INDEX 1.63% 3.49% 6.57% 18.63% 57 69
S&P 500 ENERGY INDEX -0.03% 20.24% 11.76% 98.86% 14 30
S&P 500 UTILITIES INDEX 11.64% -0.23% 6.04% 0.23% 7 27
S&P 500 MATERIALS INDEX -2.55% -2.44% 0.92% -2.98% 15 25
S&P 500 COMM SVC INDEX 0.56% 8.58% 14.06% 20.12% 14 22
S&P 500 REAL ESTATE INDEX -0.15% -0.51% 2.99% 5.07% 17 32
Total S&P 500 Index 0.84% 3.38% 6.57% 14.31% 333 500

Source: Bloomberg
 

  • S&P 500 companies in the energy sector continue to have the strongest earnings season after 14 companies, or 46.7% of the S&P 500 sector, reported their CY4Q2018 financials.
     
  • As can be seen in the table above, S&P 500 energy stocks to report CY4Q2018 financials have generated highly robust EPS growth of 98.83%, by far the highest average growth among S&P 500 sectors. Additionally, S&P 500 energy stocks to report financials beat analyst EPS estimates by an average of 20.64%, the highest average EPS beat among S&P 500 sectors.

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 18.89x 22.10x 4.76% 4.25% 17.00% 14.06%
S&P 500 CONS STAPLES INDEX 17.69x 19.02x 5.48% 3.72% 7.53% 6.67%
S&P 500 INFO TECH INDEX 17.02x 18.92x 6.25% 5.50% 11.11% 10.09%
S&P 500 FINANCIALS INDEX 11.21x 12.88x 8.79% 8.36% 14.84% 12.09%
S&P 500 HEALTH CARE INDEX 15.32x 20.31x 4.52% 4.30% 32.59% 16.39%
S&P 500 INDUSTRIALS INDEX 15.24x 16.94x 5.47% 3.57% 11.12% 10.79%
S&P 500 ENERGY INDEX 16.83x 15.55x 6.24% 3.64% -7.63% 4.24%
S&P 500 UTILITIES INDEX 17.78x 18.14x 4.09% -1.51% 2.02% 4.08%
S&P 500 MATERIALS INDEX 14.78x 15.32x 6.36% 4.24% 3.66% 8.70%
S&P 500 COMM SVC INDEX 16.07x 18.44x 5.50% 4.27% 14.74% 12.27%

Source: Bloomberg
 

  • S&P 500 communication services stocks are also having a strong CY4Q2018 earnings season with 14 companies, or 63.6% of the sector, reporting quarterly financials.
     
  • The 14 S&P 500 communication services stocks to report CY4Q2018 financials have generated average top-line sales growth of 14.1%, the highest aggregate top-line growth among all S&P 500 sectors. While S&P 500 communication services stocks are generating the highest sales growth among S&P 500 sectors, a modest 0.56%
    average sales beat indicates that analysts expected robust sales growth from the sector. On a bottom-line basis, however, S&P 500 communication services stocks are largely surpassing analyst expectations, generating the second-best average EPS surprise of 8.58% 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 28.47% 8.20% 6.37% 1.02x 4.30x
S&P 500 CONS STAPLES INDEX 24.93% 9.21% 6.69% 1.11x 3.18x
S&P 500 INFO TECH INDEX 32.43% 23.85% 19.76% 0.58x 2.74x
S&P 500 FINANCIALS INDEX 12.36% 22.56% 18.87% 0.07x 8.12x
S&P 500 HEALTH CARE INDEX 15.37% 8.97% 6.51% 0.83x 2.73x
S&P 500 INDUSTRIALS INDEX 21.10% 10.68% 7.42% 0.71x 3.88x
S&P 500 ENERGY INDEX 11.50% 9.11% 7.83% 0.89x 1.56x
S&P 500 UTILITIES INDEX 8.99% 16.54% 9.99% 0.24x 3.56x
S&P 500 MATERIALS INDEX 12.39% 12.06% 8.28% 0.60x 2.32x
S&P 500 COMM SVC INDEX 17.57% 18.79% 15.48% 0.44x 2.48x

Source: Bloomberg
 

  • The S&P 500 materials sector is having by far the worst CY4Q2018 earnings season with 15 companies, or 60.0% of the S&P 500 sector, reporting financials thus far.
     
  • S&P 500 materials stocks are the worst performing so far in CY4Q2018 earnings season in all four of the categories outlined in the table above. The 15 S&P 500 materials stocks to report CY4Q2018 financials have generated aggregate sales growth of 0.92% and aggregate EPS growth of –2.98%. Materials stocks are also lagging analyst expectations in CY4Q2018 earnings season as represented by the sector generating an aggregate sales surprise of –2.55% and an aggregate EPS surprise of –2.44%.


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