An Update on Earnings/Profit Margins.
From Dr. Ed Yardeni over at Dr. Ed's Blog:
S&P 500 profit margin estimates are also holding up, with 9.8% expected this year and 10.5% expected next year. I expect margins to remain flat in 2013 and 2014. So earnings should grow at the same pace as revenues. For earnings, I am still predicting $110 per share this year, up 5.9% y/y, and $118 next year, up 7.3%. Obviously, I am more optimistic about the prospects for revenues than the analysts. However, because they are more optimistic on margins, they are currently predicting that earnings will be $111 and $124 this year and next year.
I am still carrying a $106.50 earnings per share number for the S&P 500 in 2013. That is much lower than consensus estimates right now and I'm beginning to think that my estimate is too low. I will leave the numbers alone for the time being as I want to see what the rest of the first quarter and forward looking guidance into the summer looks like. Note though that if Yardeni is correct that fair value on the S&P 500 has the potential to be 1,540-1,705 on the S&P 500 this year and 1,650-1,830 by year end 2014.
*Long ETFs related to the S&P 500 in client and personal accounts.
posted by CR English at 7:14 AM
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