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S&P 500 Communication Services Stocks Post Strong Earnings While Energy Stocks Lag

Apr 19, 2019

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All Data and Information as of 04/18/2019 Market Close

 

  • Earnings season for US large-cap stocks ramped up this week with 79 constituents of the S&P 500 Index having reported first quarter financial results.
     
  • So far this earnings season, results are broadly positive for the S&P 500 Index. The 79 S&P 500 companies to report financials have generated aggregate EPS growth of 0.50% and aggregate sales growth of 2.61%.  
     
  • Additionally, the 79 S&P 500 companies to report first quarter financials so far have generated an average sales surprise of 0.32% and an average EPS surprise of 4.15%, as can be seen in the table below.

S&P 500 CY1Q2019 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 0.06% 5.11% 9.11% -0.79% 6 64
S&P 500 CONS STAPLES INDEX -0.10% 5.87% 5.46% 3.76% 9 33
S&P 500 INFO TECH INDEX 0.00% 4.08% -1.74% -15.21% 7 68
S&P 500 FINANCIALS INDEX 1.02% 4.13% 0.41% 1.51% 28 68
S&P 500 HEALTH CARE INDEX 1.20% 3.29% 6.34% 7.92% 5 62
S&P 500 INDUSTRIALS INDEX -1.29% 3.24% -0.01% 3.96% 16 69
S&P 500 ENERGY INDEX -1.25% 1.40% 0.54% -3.02% 2 30
S&P 500 UTILITIES INDEX - - - - 0 27
S&P 500 MATERIALS INDEX -1.69% 15.89% -4.28% -4.13% 1 25
S&P 500 COMM SVC INDEX 0.18% 20.20% 9.00% 9.84% 2 22
S&P 500 REAL ESTATE INDEX 1.22% -0.13% 9.06% 13.03% 3 32
Total S&P 500 Index 0.32% 4.15% 2.61% 0.50% 79 500

Source: Bloomberg
 

  • So far this earnings season, the S&P 500 Communications Services sector appears to be producing the best results, although just 2 S&P 500 Communication Services companies, or 9.1% of the sector index, have reported financials.
     
  • The S&P 500 Communication Services Index has generated an average EPS surprise of 20.20%, the best among S&P 500 sectors. The average sales surprise of the S&P 500 Communication Services Index lags behind their average earnings surprise, although it is still positive at 0.18%.  
     
  • S&P 500 Communication Services stocks also look attractive purely on a top and bottom-line growth basis. The average sales growth generated by S&P 500 Communication Services companies to report first quarter financial is the third-best among S&P 500 sectors at 9.00%. The S&P 500 Communication Services Index’s average earnings growth, meanwhile, is also attractive at 9.84%, the second-best 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 20.99x 24.31x 4.16% 3.85% 15.80% 12.64%
S&P 500 CONS STAPLES INDEX 19.06x 20.04x 4.88% 3.53% 5.18% 5.34%
S&P 500 INFO TECH INDEX 19.27x 21.79x 5.41% 4.77% 13.10% 10.18%
S&P 500 FINANCIALS INDEX 11.94x 13.37x 7.63% 8.67% 12.05% 8.48%
S&P 500 HEALTH CARE INDEX 14.52x 19.39x 4.59% 4.63% 33.54% 16.17%
S&P 500 INDUSTRIALS INDEX 16.32x 17.94x 5.13% 3.31% 9.89% 9.32%
S&P 500 ENERGY INDEX 17.15x 16.73x 5.81% 3.67% -2.41% 5.94%
S&P 500 UTILITIES INDEX 18.19x 19.42x 4.04% -1.78% 6.76% 5.25%
S&P 500 MATERIALS INDEX 16.72x 14.21x 6.43% 3.39% -14.99% 1.20%
S&P 500 COMM SVC INDEX 17.17x 19.61x 5.01% 3.93% 14.19% 11.68%

Source: Bloomberg
 

  • The S&P 500 Energy sector appears to be having the worst earnings season so far, however, it is worth noting that just 2 companies in the index have reported financials, representing just 6.7% of constituents.
     
  • The S&P 500 Energy companies to report first quarter financials have generated an average sales surprise of –1.25%, the third-worst among S&P 500 sectors, and an average EPS surprise of 1.40%, the second-worst among S&P 500 sectors.  
     
  • As can be seen in the table above, analysts expect S&P 500 Energy stocks to generate average earnings growth of 5.94% per annum over the next 3 years. The S&P 500 Energy companies to report earnings, however, have seen their bottom-line fall by 3.02% on average. The S&P 500 Energy Index also maintains one of the worst ROEs of 10.29% among S&P 500 sectors, as can be seen in the table below.

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 28.14% 7.91% 6.07% 1.03x 4.37x
S&P 500 CONS STAPLES INDEX 24.15% 8.58% 6.52% 1.13x 3.18x
S&P 500 INFO TECH INDEX 34.38% 23.78% 20.47% 0.57x 2.82x
S&P 500 FINANCIALS INDEX 10.44% 21.13% 16.33% 0.07x 8.16x
S&P 500 HEALTH CARE INDEX 15.20% 8.83% 6.46% 0.82x 2.79x
S&P 500 INDUSTRIALS INDEX 21.11% 10.57% 7.29% 0.70x 3.86x
S&P 500 ENERGY INDEX 10.29% 9.08% 7.31% 0.71x 1.87x
S&P 500 UTILITIES INDEX 9.92% 16.93% 11.38% 0.23x 3.58x
S&P 500 MATERIALS INDEX 12.37% 11.63% 7.97% 0.62x 2.34x
S&P 500 COMM SVC INDEX 16.48% 18.75% 14.49% 0.44x 2.50x

Source: Bloomberg
 

  • It is worth noting the discrepancy between sales and earnings relative to analyst expectations for the S&P 500 Real Estate Index.
     
  • S&P 500 Real Estate stocks to report financials have generated an average sales surprise of 1.22%, the best among S&P 500 sectors! Their average EPS surprise, however, tells a different story; at 0.13%, it is the worst among S&P 500 sector indices!  
     
  • Looking purely at growth, however, the S&P 500 Real Estate sector still looks healthy. S&P 500 Real Estate stocks to report financials have generated aggregate EPS growth of 13.03%, the best among S&P 500 sectors, and an average sales surprise of 9.06%, the second-best among S&P 500 sectors.

 

 

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