Radar Screen – Blending Q2 Earnings and On to Q3

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Earnings, valuations, value for time and volume are the grail as the 11,195 S&P 500 analysts give opinions based on what they see. When threats to earnings appear, the market revaluations occur. The largest threats to earnings have not materialized as of today.

Looking Ahead: Forward Estimates and Valuation Earnings Guidance: Fewer Companies Issuing Negative EPS Guidance for Q3 than Average The term “guidance” (or “preannouncement”) is defined as a projection or estimate for EPS provided by a company in advance of the company reporting actual results. Guidance is classified as negative if the estimate (or mid-point of a range estimates) provided by a company is lower than the mean EPS estimate the day before the guidance was issued. Guidance is classified as positive if the estimate (or mid-point of a range of estimates) provided by the company is higher than the mean EPS estimate the day before the guidance was issued. At this point in time, 6 companies in the index have issued EPS guidance for Q3 2017. Of these 6 companies, 1 has issued negative EPS guidance and 5 have issued positive EPS guidance. The percentage of companies issuing negative EPS guidance is 17% (1 out of 6), which is below the 5-year average of 75%. FactSet.

Growth Expected to Continue for Remainder of 2017 For the second quarter, companies are reporting earnings growth of 6.8% and revenue growth rate of 4.8%. Analysts currently expect earnings and revenue growth to continue in 2017. For Q3 2017, analysts are projecting earnings growth of 7.1% and revenue growth of 5.0%. For Q4 2017, analysts are projecting earnings growth of 12.2% and revenue growth of 5.0%. For all of 2017, analysts are projecting earnings growth of 9.6% and revenue growth of 5.3%. FactSet.

Threats to earnings can manifest themselves in different ways. A reminder from a prior Radar follows:

“Data and consensus that begins to indicate lower (this is not happening yet,) impact from events that haven’t occurred yet and the Fed. Historically, three one-half percent increases in the Discount Rate has eventually caused a reaction lower for the market. Radar does not believe fighting the Fed is the right choice. Radar sees rates historically low and inflation not showing itself to justify the rate increases we have gotten so far. How the market will react to the next two ¼% hikes or how much they will be, are not known. Between 10% 15% and 20% lower are possible and will be determined initially by consensus downgrades to earnings. Political/Geo Political threats happen when they surface.” RADAR

Charts:

Quarterly View:

Weekly View:

I have written this article myself and it expresses my opinions. I am not receiving any compensation or gratuities for it. None! Radar follows news sources it believes are highly reliable.

Radar offers a free observation of things that show up. It cannot be all inclusive! The observations are done through a brief article that takes about five minutes to read each week. It offers ideas and actions that prudent people may want to consider. Radar reads many articles and keeps a calendar to look forward. People make trades. Radar observes Value and Earnings from those trades. Analysts create the consensus view.

Radar is always accessible for your input, questions, critiques, desires and general questions.

Notes:

https://insight.factset.com/earningsinsight_07.14.17

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FED Balance Sheet

Released On 7/13/2017 4:30:00 PM For wk7/12, 2017

Prior
Actual
Level
$4.467 T
$4.467 T
Total Assets – Weekly Change
$3.9 B
$-0.6 B
Reserve Bank credit – Weekly Change
$-4.1 B
$-0.2 B
13 Jul 17:11 (US) US based stock funds see $3.5B inflow in week ended July 12th v $3.3B outflows in prior week (first inflow in 3 weeks) – Lipper – Taxable bond funds see $0.9B inflows – Treasury funds attract $0.8B in inflows.


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