Well, the fundamental forecaster is at it again

Discussion in 'Trading' started by sportsguy, Jan 4, 2003.

  1. See the the lastest EPS forecast from the statistical torture machine. . . The LIGHT BLUE is the actual EPS and the DARK BLUE is the www.spglobal.com conservative estimates. The more aggressive estimates are even worse, obviously.
    The pink is what history says the SP500 should approximate to. . . . with 10 years of data.

    The Actual EPS broken down weekly into a smooth
    trend from one quarter to the next quarter, such that economic movements from one quarter to the next quarter, as reflected in the monthly data releases, and company releases, and as the gradual effect of business behavior can be estimated, since sales and earnings don't happen all at once, and
    since earnings move with some momentum as well . . . .

    the source data comes from http://www.spglobal.com/earnings.html which i assume is as accurate as the best source. . . . my only adjustment is to break it down to weekly and make the date of the known
    earnings = the mid week of the quarter. . . where most companies have released their numbers, and the effects of earnings releases are then factored in to people's evaluation of P/E. . . .

    So 2002 Q3 EPS = August 16th week, and Q4 week = November 16th, and Q1 2003 = Feb 14th. just take a look at the enclosed chart. . . . and from there, one can estimate an annual EPS and
    forecast an appropriate P/E - annual 2002 looks like about $46.10 of EPS and Q1 2003 looks like 10.83 against 10.85 last year, or flat earnings growth. . . AND flat annual growth
    again in Q1. . . .

    Now what kind of earnings multiple should be put on that?
    the current of 20 gets us to SPX 920 . . . the average of 15 gets us to SPX 690. . .

    just food for thought. . . . i suspect that the earnings warnings will be the Q1 event. . . . :eek: :eek:

  2. kind of thought provoking when you consider that the market is supposed to discount future events. Either earning will show up, or the p/e will decline.