To The Moon

Review of past S&P500 earnings (as of Q3/2022)

Currently, the 2022 Q4 earnings season is ongoing and thus, the chart below will be based on the last update of the quarter ending 30 Sep 2022.

S&P500 earnings - Source: https://ycharts.com/indicators/sp_500_eps

Basic Info (from Y Chart)

The S&P 500 Earnings Per Share measures the composite earnings per share for the S&P 500. This metric comes from Standard & Poors, and gives an idea of the overall EPS earned from the major US companies. EPS numbers experienced tumultuous times during the financial crisis in 2008. S&P 500 EPS reached as low as -23.25, when many companies were not able to return a profit.

Stats of S&P500 earnings - Y Chart

As of 30 Sep 2022, S&P 500 Earnings Per Share is at a current level of 44.41, up from 42.74 last quarter and down from 49.59 one year ago. This is a change of 3.91% from last quarter and -10.45% from one year ago.

Other indicators of S&P500 - Y Chart

Are we heading into an earnings recession? Note the Yahoo Finance chart below is based on % of growth and a different metric used by Y-Chart (above).

screenshot from video - note the negative EPS growth as per the ongoing earnings season.

Source: Yahoo Finance https://sg.finance.yahoo.com/video/stock-market-headed-earnings-recession-163204497.html

Extract from the news article:

Tracking the S&P 500 EPS, and one year ago, for the first quarter of 2022, we had an EPS in the S&P 500 of, I believe, 225.6, thereabouts. And we're coming in this year so far at about 221, so that's why we are seeing a little bit of negative growth in EPS.

We're talking about an earnings recession. Now, we have been talking about a general economic recession in the United States,but it usually begins with an earnings recession, first, and then an industrial recession, and then an economy wide recession.

At this point of earnings, S&P500 is showing negative EPS growth (Q4/2022).

Thoughts

While we are still in the midst of the earnings season, most of the heavyweights like Big Tech have reported their earnings, with a largely gloomy overtone.

News extract (dated 12 Jan 2023):

A little more than a year ago, holding an S&P 500 index fund was becoming more and more like just holding a tech stock fund. In the latter half of 2021, stocks in the tech and communication services sectors, which includes Meta and other big internet companies, made up nearly 40% of the entire S&P 500. Now, they’re down to 33%.

Source: https://apnews.com/article/technology-stocks-and-bonds-economy-pandemics-business-fee639cb5318ad31750ef0725819c6ac

With the market largely driven by Tech companies, it is left to be seen how the rest of the earnings could save “S&P Earnings” from negative growth.

Let us not just focus on revenue. Earnings and market outlook could sway the price in different directions. With layoffs crowding the news, businesses are taking various measures to manage their costs and keep their businesses afloat.

Screener - using high debt/equity and negative profit margin for S&P500 (07Feb2023) using Finviz

Companies without debt cannot go under. Let us monitor their performances closely. Should the fundamentals prove to be less than convincing, exiting some of the stocks listed above can be a worthy consideration. It is a “surprise” to find Amazon $Amazon.com(AMZN)$ listed on this list of 17 companies.

1 quarter does not define the performance of a business. Reviewing the fundamentals over a longer timeframe will bring objectivity. However, this is a good red flag to help us monitor.

Let us spend within our means, invest with what we can afford to lose and let us consider saving “Cash for Crash”. Do not leverage. When the opportunities come, let us be bold to step out to buy great companies at good discounts.

@TigerStars

$S&P 500(.SPX)$