Earnings Reality In One Chart


Only 38% of S&P 500 companies that have reported have beaten revenue expectations – compared to a historical average of around 46%. As Bloomberg notes, Q3 2013 will be thefirst time for 3 consecutivequartersofsub-50% meetingexpectationssincetheirrecordsbegan. Earnings are not much better having seen a slide in performance relative to expectations for 4 quarters now. It seems the hockeystickof H2 2013 earningshopethatwe so vociferouslypointedout as ridiculous early in the year is indeed far too high and combined with valuations (as wenotedhere) that are stretched (Price-to-Sales at 1.6x isaroundtwicethe norma sincethe 1990s) it suggests that any hint of a taper will remove the only leg left for stocks – that of hope-based multiple expansion.

Source: Bloomberg

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