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S&P 500 Energy Stocks Continue Stellar Earnings, Materials Harshly Lag

Feb 18, 2019

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All Data and Information as of 02/15/2019 Market Close

 

  • Earning season for CY4Q2018 financials is nearing its end with 395 S&P 500 constituents, or 79.0% of the US benchmark index, having reported their quarterly financials.
     
  • The broad S&P 500 Index is having a strong earnings season so far with companies to report financial generating an average sales beat of 1.06% and an average EPS beat of 3.23%.
     
  • In terms of growth, the average S&P 500 stock is growing their bottom-line at more than twice the pace of their top-line with S&P 500 companies to report generating average sales growth of 6.61% and average EPS growth of 13.76%, as can be seen in the table below.
     
  • This will drive an overall improvement in operating margin, which is contradictory to the thesis that margins are contracting. 

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 1.76% 5.86% 7.60% 12.97% 39 64
S&P 500 CONS STAPLES INDEX -0.05% 2.48% 3.19% 5.28% 25 33
S&P 500 INFO TECH INDEX 0.10% 2.26% 0.71% 4.95% 57 68
S&P 500 FINANCIALS INDEX 0.99% -0.60% 3.02% 12.24% 67 68
S&P 500 HEALTH CARE INDEX 1.81% 1.57% 8.42% 11.32% 50 62
S&P 500 ENERGY INDEX -0.04% 18.17% 11.99% 98.90% 18 30
S&P 500 MATERIALS INDEX -2.39% -2.96% 2.00% -1.67% 20 25
S&P 500 INDUSTRIALS INDEX 1.63% 3.27% 6.75% 18.92% 60 69
S&P 500 COMM SVC INDEX 0.61% 8.12% 13.03% 21.05% 21 22
S&P 500 UTILITIES INDEX 8.35% -0.46% 5.09% -2.25% 12 27
S&P 500 REAL ESTATE INDEX 1.44% 0.36% 13.06% 6.96% 26 32
Total S&P 500 Index 1.06% 3.23% 6.61% 13.76% 395 500

Source: Bloomberg
 

  • S&P 500 energy stocks are having the strongest CY4Q2018 earnings results among S&P 500 sectors so far this season. It is worth noting, however, that only 60% of S&P 500 energy stocks have reported their quarterly earnings, the second-least reported on sector in the S&P 500.
     
  • In terms of bottom-line EPS, the S&P 500 energy sector is leading S&P 500 sectors both in terms of EPS growth and beating consensus EPS estimates. S&P 500 energy stocks to report financials have generated an average of 98.9% y/y bottom-line EPS growth, crushing all other S&P 500 sectors with the next best being the S&P 500 communication services stocks, who have generated average EPS growth of 21.05%. 
     
  • S&P 500 energy stocks are also performing well in terms of sales growth with the average constituent reporting 11.99% top-line growth, the third-best sales growth among S&P 500 sectors. In terms of beating sales estimates, however, S&P 500 energy stocks are lagging, missing consensus by an average 0.04%.

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 19.32x 22.58x 4.67% 4.17% 16.90% 14.01%
S&P 500 CONS STAPLES INDEX 17.90x 19.19x 5.43% 3.67% 7.19% 6.60%
S&P 500 INFO TECH INDEX 17.40x 19.39x 6.15% 5.42% 11.44% 9.97%
S&P 500 FINANCIALS INDEX 11.53x 13.38x 8.61% 8.11% 16.02% 12.50%
S&P 500 HEALTH CARE INDEX 15.84x 21.01x 4.43% 4.22% 32.61% 16.28%
S&P 500 INDUSTRIALS INDEX 15.68x 17.43x 5.35% 3.50% 11.15% 10.84%
S&P 500 ENERGY INDEX 17.80x 16.23x 6.14% 3.62% -8.83% 4.87%
S&P 500 UTILITIES INDEX 17.78x 18.35x 4.04% -1.33% 3.21% 4.42%
S&P 500 MATERIALS INDEX 15.38x 15.12x 6.27% 3.35% -1.69% 6.86%
S&P 500 COMM SVC INDEX 16.29x 18.57x 5.44% 4.26% 14.04% 11.77%
Total S&P 500 Index 16.22x 18.43x 5.71% 4.42% 13.65% 11.02%

Source: Bloomberg
 

  • S&P 500 materials stocks are having an abysmal earnings season with 80% of the S&P 500 sector reporting quarterly financials.
     
  • The S&P 500 materials sector is the worst performing S&P 500 sector both in terms of sales surprise and EPS surprise. The average S&P 500 materials stock has reported an average sales miss of 2.39% and an average EPS miss of 2.96%.  
     
  • S&P 500 materials stocks are also lagging in terms of sales and EPS growth, generating average sales growth of just 2.00% and average EPS growth of –1.67%. The S&P 500 materials sector is the second-worst S&P 500 sector in both of these categories.

 

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 28.01% 8.21% 6.27% 1.02x 4.30x
S&P 500 CONS STAPLES INDEX 25.87% 9.23% 6.93% 1.11x 3.19x
S&P 500 INFO TECH INDEX 34.03% 23.85% 20.76% 0.58x 2.74x
S&P 500 FINANCIALS INDEX 12.47% 22.41% 18.98% 0.07x 8.12x
S&P 500 HEALTH CARE INDEX 15.27% 8.98% 6.47% 0.83x 2.74x
S&P 500 INDUSTRIALS INDEX 21.05% 10.68% 7.40% 0.71x 3.88x
S&P 500 ENERGY INDEX 11.22% 9.12% 7.60% 0.75x 1.87x
S&P 500 UTILITIES INDEX 8.96% 16.30% 9.98% 0.24x 3.56x
S&P 500 MATERIALS INDEX 11.81% 12.08% 7.88% 0.60x 2.32x
S&P 500 COMM SVC INDEX 17.32% 18.60% 15.25% 0.44x 2.47x
Total S&P 500 Index 17.03% 13.63% 10.78% 0.33x 4.49x

Source: Bloomberg
 

  • It is fascinating to note the discrepancy between the sales and EPS of the S&P 500 utilities sector, although it is worth noting that only 44.4% of constituents have reported quarterly financials.
     
  • So far this earnings season, S&P 500 utilities stocks have generated the best aggregate sales beat among all S&P 500 sectors, beating analyst sales consensus by an average of 8.35%.  
     
  • In terms of EPS beats, however, the average S&P 500 utilities stock to report quarterly financials missed consensus by 0.46%. In terms of EPS growth, S&P 500 utilities stocks are the worst performing sector in the S&P 500, observing an average EPS slowdown of 2.25%. Perhaps bearish energy prices at the end of 2018 are to blame.

 

 

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