Perspectives Blog

First quarter earnings wrap up – A bit light

Tom West, Director of Equity Research | May 19, 2014

First quarter earnings results fell a bit short of the annual pace that we proposed at the beginning of the year. Corporate revenues did not track forecasts due to challenging weather, price increases remaining at the low end and subdued cyclical activity and investment spending. We should probably adjust full year estimates down a bit, but not by much. The first quarter reporting season has wound down for those companies with “normal” reporti…

Triangulating on 2014 corporate earnings

Tom West, Director of Equity Research | January 27, 2014

Estimating corporate earnings with bottom-up forecasts, top down forecasts and empirical forecasts will result in a range of outcomes While we believe bottom-up forecasts provide the best estimate, the other two methods can be useful in testing the result We look at top down build-up earnings growth for the S&P 500 and growth expectations by sector to arrive at an EPS growth estimate for 2014 I generally think the best way to build up an e…

A tepid cyclical lift

Tom West, Director of Equity Research | April 28, 2014

Cyclical investment and discretionary spending are on track to deliver earnings growth of 7% in the S&P 500. Strength in some consumer durables appears more of a “wallet share” gain than a general lift due to recovering wages or a release of excess savings. Construction and energy are poised for another year of growth, while “enterprise” spending and investment in the tech sector remain challenged. The S&P 500 Index should grow earning…

Second quarter earnings preview

Tom West, Director of Equity Research | June 30, 2014

We believe YTD valuation improvement in stocks is more likely the result of basic supply and demand than an upward revision off corporate prospects. Going into corporate reporting season, we’re focused on whether the cyclical sectors show some signs of increasing activity. For the less cyclical sectors and consumer discretionary industries, we want to see if pricing holds up amid flattish demand and a tepid wage growth. In about a week, corpor…

Second quarter U.S. corporate earnings wrap-up

Tom West, Director of Equity Research | August 18, 2014

Non-cyclical sectors slightly out performed cyclical sectors during the quarter. In technology, the U.S. is improving, Europe is still not strong and developing markets lag. The healthcare sector improved, but it is still a question mark for the second half of the year. As the economic recovery matures, we have seen a fairly consistent pattern in quarterly earnings: estimates come down during the course of the quarter, and then beat the “lower…

Missing links and multipliers

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | June 9, 2014

…rmations have failed to pick up and remain at multi-year lows. The undercurrents include mediocre income and job gains in combination with high student loan debt. While some have blamed weather, the weakest areas included the west and south—areas largely unaffected by snow and cold. But the most important shifts seen now are both cyclical and secular, together with re-regulation and some noted missing links. First, new regulations were implemente…

What’s behind the weakness in U.S. housing?

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | March 24, 2014

…, almost all data releases incorporate seasonal adjustments in an effort to even out the month-to-month wiggles due to poor weather. Second, not all of the U.S. suffered under the cold, wintry conditions. Indeed, areas to the west and southwest enjoyed warmer and drier weather—and much economic activity happens there too despite our proclivity to view things with a regional mindset. I am not dismissing the weather effect, but do believe there are…