Q4 Earnings Season: S&P 500 vs. Russell 2000
Below is a great excerpt from Zacks.com Q4 earnings report. We all expected Q4 to be weak and it didn’t disappoint… Even ex-energy sectors are down more than first projected. Yes the US dollar is hurting pretty much everyone across the board but the larger trend is the global slowdown. I can’t state it enough that we are in a new paradigm of slow growth. Investors need to find the strong companies that have established revenue streams and companies need to focus on their key products as well as limiting debt.
Click here to visit the Zacks website.
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With more than two-thirds of the Q4 earnings results now behind us, we can say with a lot of confidence that it has been a weak earnings season. That shouldn’t be a surprise for any one as the earnings picture has been on the weak side for almost a year now, with Q4 on track to be the third quarter in a row of negative earnings growth. The worrisome part of this disconcerting earnings backdrop is that the growth issue isn’t going away any time soon, with estimates for the current and coming quarters coming down at an accelerated pace in recent days.
Driving this earnings challenge is the combination of a slowing global economy, the strong U.S. dollar and problems in the Energy sector. The big companies that are part of the S&P 500 index are particularly exposed to these headwinds since they derive an estimated 40% of their revenues from beyond the U.S. borders. Many of the well-known players like Apple (AAPL – Analyst Report), Coca Cola (KO – Analyst Report) and others earn more than two-thirds of their total revenues from international markets. This international exposure makes these big players vulnerable to both the exchange rate issue as well as economic weakness abroad.
Small capitalization companies don’t face these headwinds to the same extent as their large-cap peers do. Given this lack of international exposure and largely domestic orientation, the small-cap operators should be doing a lot better in the Q4 earnings season. Unfortunately, we don’t see that in the Q4 earnings reports thus far – growth is big a challenge for the small-caps as it is for the large caps and most small-caps are coming short of consensus estimates more frequently compared to other recent periods. We should keep in mind that while we are quite further along in the Q4 earnings cycle for the large-cap S&P 500 index, we are still at a relatively early stage for the small-cap Russell 2000 index.
Q4 Scorecard for the S&P 500
Including all of this morning’s reports, we now have Q4 results from 345 S&P 500 members that combined account for 79.6% of the index’s total market capitalization. Total earnings for these companies are down -5.7% from the same period last year on -4.6% lower revenues, with 67.6% beating EPS estimates and 47.1% coming ahead of revenue estimates.
The charts below compare the results thus far with what we had seen from the same group of 345 S&P 500 members in other recent periods.
As you can see above, the beat ratios are about in-line with historical levels while the growth rates are notably on the weak side. The growth picture barely moves into positive territory even on an ex-Energy basis, but gets even worse once easy comparisons at Citigroup (C – Analyst Report) are taken into account.
Q4 Scorecard for the Russell 2000
For the small-cap index, we currently have Q4 results from 682 index members or 34.6% of the index’s total members (the index currently has 1971 members). Total earnings for these 682 companies are down -0.2% from the same period last year on -4.9% lower revenues, with 47.2% beating EPS estimates and 34.8% coming ahead of revenue expectations.
The charts below compare the growth rates and beat ratios for these 682 Russell 2000 members with what we had seen from the same companies in 2015 Q3 and the 4-quarter average.
While this is admittedly still an early stage in the Q4 reporting cycle for the small-cap index, it is nevertheless quite obvious that the growth challenge is even more pronounced for the Russell 2000 index. And while the S&P 500 growth weakness was largely expected, the Russell 2000 weakness has come as a negative surprise with both the earnings and revenue beat ratios tracking below other recent periods.
Estimates for 2016 Q1 & Beyond
Estimates for 2016 Q1 are coming down on a daily basis as companies report Q4 results and offer a soft outlook for the current period. Total earnings for the S&P 500 index in 2016 Q1 are currently expected to be down -7.5% from the same period last year, which is down from an expected decline of -1.1% at the start of the period. While most of the negative revisions to Q1 estimates reflect developments in the oil patch, estimates for other sectors are coming down as well, with earnings for the index on an ex-Energy basis now expected to be negative as well.
The chart below shows the evolution of earnings growth expectations for Q1, both in the aggregate as well as on an ex-Energy basis.
The growth challenge is expected to continue into the following quarter as well, with total 2016 Q2 earnings for the S&P 500 index currently expected to be in the negative. As you can see in the chart below, all of this year’s growth is dependent on estimates for the back-half of the year.
Part of the back-half improvement reflects an end to the Energy sector’s drag due to easier comparisons for that sector and consensus expectations of stabilization in oil prices going forward. But it’s not unusual for Wall Street analysts to be optimistic about the outer periods; they start out with a positive tone and start getting realistic only as the period gets nearer. If history is any guide, then we should see those back-half estimate start coming down in the coming months.
To access the full Earnings Trends article, please click here.
Called this earlier………….
GOLD UP BIG…………$41…
Wow. It looks like what we talked about in the past turns real. One day gold is just going to go up and up, never looks back. It will leave the people on sidelines in the dust and kill the bears. In it the day? It feels too early.
1241.65……….number to beat today………………………..
You are absolutely correct……………will leave them in the dust………most are asleep, and will not catch the bottom.
The nice thing today………..is the UP $41…..WHICH IS HUGE……that is the strong point.
Gold in Canadian dollar $1730 , above prior to QE3 level.
FORGET 800…..it is not going to happen…..jmho
Someone here has forecasted 500-600. Any thought?
Yes , they do not know what they are talking about……………. 🙂
Get there names and when they were born………and that will tell you a lot…… 🙂
there to their…………
Franco-Nevada To Acquire Precious-Metals Stream From Glencore For $500 Million
Thursday February 11, 2016
Hope Glencore can survive.
Many of the larger commodity conglomerates are under duress. I believe we’ll continue to see this kind of divestment of assets for survival. Teck just offloaded those deals to Sandstorm, Anglo American off-loaded Platinum mines to Sibayne, and Oceana Gold just picked off that mine from Newmont.
>Lots of shake up and assets are being traded like baseball cards…….
Thanks for following these.
Streamers may be at risk, if these companies go BK
The streamers have so many deals in place that I’m not really worried about that. Often the deals are structured so that the royalties or streaming deals follow the asset not the company. This means if they do go bankrupt and another company buys the asset, then…..Surprise…..the streaming deal is still in place.
Streaming really is a brilliant business model, and far less risky than the miners themselves, and the cash starved miners don’t have any other way to stay alive, so it is life preserver (but an expensive one). However, the streamers are more solid but may not grow as much as selective miners will. I consider them more of the stability in my mining investments.
Does it mean a lot of miners have lost future growth? Excelsior. You know more details about miners. I have been avoiding any miners with major position to sell future production. I actually avoids miners altogether, more or less.
Yes it does Dragonite. I actually agree with Rob McEwen that mining companies are eating into their future revenues, just like hedging can do. However, I also agree with Nolan Watson from Sandstorm (and True Gold for Matthew 🙂 ) .
His point is very astute that mining companies, already burdened down with debt in an environment very hard to raise money in only have a few choices:
1) Dilute the snot out of investors (the miners have already done that and decimated investors. This is part of the issue with too much debt)
2) Sell entire assets (investors get no value, and normally a company will get punished for this and for having made bad management decisions in the past)
3) They do a streaming deal and get access to the funds then need to survive, and the company lives to fight another day. Investors at least keep some exposure to that asset (a division, a mine, exploration target, land) and if metal or commodity prices increase then everyone will still make money – the streamers, the customer, and investors.
Here is a good clip of the CEO from Sandstorm Gold putting Rob McEwen in his place regarding his objection to streaming in November. I really like Nolan Watson:
Sandstorm Gold defends streaming – Tue, Nov 3, 2015 – Nolan Watson
http://www.bnn.ca/Video/player.aspx?vid=741471
The other concept that is being discussed in the streaming community is whether the streaming deal should be “Life of Mine” or for a “Set Period”. Randy Smallwood, the CEO at Silver Wheaton recently defended the “Life of Mine” rationale, due to all the risks of the mining companies keeping their word or keeping things on track in their projected timeline.
Check out starting at 5:30 on this video. Randy makes some great points.
http://www.bnn.ca/Video/player.aspx?vid=792760
Rick Rule weighs in on Streaming deals and sees it as being either a big help or a hindrance for the mining company depending on their situation and the terms of the deal. I agree from the mining companies standpoint, but the point that Randy Smallwood made up above, is that the streaming deals are not without risk to the streaming company either. It is definitely a 2 way street.
Here is the interview with Rick….
________________________________________________________________________
Sprott Monthly Market Update with Rick Rule: Uranium, Gold and Silver
Jan 24, 2016 – By Collin Kettell- Palisade Radio
Dragonite…If a company as big as Glencore are selling off assets , you can be sure they are in trouble…$500 million is just a fraction of what they owe.
Agreed IrishT. They aren’t just trimming the fat…..they are fighting for survival.
Yes, just like what canadian oil companies lime encana are doing
Yep. Let the mergers and acquisition games begin!
Some will get over extended in the acquisition also………….
That is human nature…… to over do it…….
Glencore:
Some of DB’s troubles are aktually Said be due to Glencore.
Hope we take out 1320 in this run. It is the 2013 April crash low. It is sign of long term reversal.1180 is behind us. So the chance of going to 900 is very low.
I’d be ecstatic if $1308 was taken out (the high from early 2105). It think there would have to be a pullback and consolidation first, but maybe there would be a second leg up as Gary mentioned that could take us there. I know Rick A. has 1308 as his Matterhorn peak. We’ll see how things go…..
Agree. If we reach 1320 even a correction is healthy. But I remember Rick A targeted 810.
Do not look back……….that is history……..810 is not going to happen.
Gold miners have a lot of catching up to do, in $CAD terms:
$CAD gold price above $1700/oz.
Up nearly 70 cdn $ from yesterday .
I welcome the miners rise to catch up. It’s gonna be fun!
It’s a Green Day in miners fo sho…….. I may get that Greek Island yet 🙂
I had my first 4-bagger today ! ! !
(Bought Claude @ US$ 0.20 in Oct2014 … $0.80 this morning) … Thanks to Matthew ! ! !
Congrats Brian!!! Claude is quality.
We should start seeing more and more multi-baggers if we really have turned the corner in the PM space.
That’s awesome, Brian. That means you played it a little better than I did. I bought too much to soon but did average down hard when it went lower than I thought it could.
Agreed. I had 2 really good profitable trades with Claude, but am currently out of it and into other stocks. These other stocks have had very nice percentage gains and nice moves technically out of January, so all is good.
Like we discussed the other day, Claude was kind of an anomaly compared to even some of the best companies that also bottomed in 2013, so it just kept streaking higher.
Now a number of companies are going to display those same qualities, so I’ll be more hesitant to sell, but may do a little trimming from time to time.
That anomaly was due to how dicey things appeared to be in late 2013 when they voluntarily delisted in the U.S. to save money. The start of the big turn for them (and all I needed for relief) was the sale of the Madsen property — painful as it was to let it go.
When it was about 26 cents…
On July 29, 2014 at 11:00 am,
Matthew says:
Claude Resources (CRJ.TO) is another one that has been really beat up by this bear market. I am convinced that the worst is absolutely behind Claude and that the current price reflects risks that just aren’t there and concerns that have been dealt with. It just rallied 100% in five weeks and is going to go much higher in the weeks and months ahead.
Yes, I held Claude from 2012 (after our old discussions), then averaged down in a big way in 2013, and it is one of the very few stocks I held until 2015. I remember those developments for sure, but I still don’t think selling Madsen explains the tear up with almost no corrections for the last year.
I guess you mean that these were the triggers for you that the bottom was in, but still the strength Claude showed relative to almost 99% of the miners was very impressive. I sold out on the initial run up. Then got back in and exited in the early January spike this year (but missed the rest of the run up). However, I redeployed these funds in mid January into Silvercorp, Avino Silver and Gold, and Americas Silver (now US Silver & Gold), so it’s all good.
I also had a great run in Argonaut Gold. Do you ever trade it any more?
It was still on a tear today so I lighted my load a bit, but I figured it would have a big reaction to an increase in the Gold/Silver price.
No, Madsen doesn’t explain the move but it did seem to mark the turning point where investors realized that Claude was going to be fine. Many improvements followed.
I have not looked at Argonaut in quite awhile.
Yeah, I figured that is what you meant. Thanks Matthew.
Off topic:
I wonder who will get the Nobel prize for gravitation waves.
Hope you guys like your gold insurance policies. We are entering a different world.
Einstein deserve it but he did not live long enough for his theory proven true. Just checked the net, it is Hulse and Taylor who proved the theory first by discovering a new pulsar and won 1993 physics prize. Not sure others.
Looks like another Noble prize will be rewarded on this.
Kudos to Gary for his call on this major change in the market.
He may have been early in December, but he saw it coming, watched it closely, and wasn’t afraid to be bold and call it like he saw it.
He has never said bet the farm and has acknowledged when he’s been wrong.
Might be a good idea to interview on the KEReport and get more involved here 🙂
Here you go Gary Savage:
thanks CFS……..for the post……………
I watched it cfs, he says we either go up….or go down.
One thing I can say about Gary – the man is BOLD. He was not afraid to be the only technician to buy the GDX breakdown and then he held on to his conviction for the huge profit. ( Something like 800% on his quest portfolio. So… I am wondering about his next bold call – that stock market is going to go parabolic later this year… Any takers??? LOL
We stayed for the pain enjoy the gains….especially the Long term fundamental investors what a joy ride it’s been lol!!!!
wheeeeeeeeeeeeeeee
Good day to ya Marc
Where is tweety…………..
You too jerry!!!! Much peace!!!!
I bought the heck out of the breakdown in the miners.
Gold is now challenging the last weekly chart Fibonacci EMA resistance.
This chart will show today’s action this evening:
Last night I commented to Glenfidish the following:
“there’s nothing like a monster short squeeze to end a long trend. A rip to 1260 wouldn’t surprise me…”
and…
Speaking about gold, “this crazy chart does not look exhausted (aside from the shooting star on Monday)”
and…
“Given that 93.1% of gold miners declined yesterday, we probably have enough short fuel for another blast higher.”
1262 ….was posted ….so, you are on a roll………. 🙂
Wowzers!!!! What a day!
Good call Matthew. This is has been a fun ride!
Gary Savage and Michael Oliver the only two analysts who were correct!
HUI has just made a 61.8% FIB rise from the January low. Any thoughts?
That is a level that would make sense to run into resistance. This move is strong though. I’m not selling, but will likely trim a bit on a few of the winners today.
It is possible that Doc is shorting GDX around here…. But we have to wait and see what he says…
Doc mentioned on a different blog that he may start selling some of his mining positions over the next few trading days.
See down towards the bottom….
http://www.kereport.com/2016/02/11/thursday-morning-discussion-chris-doc/
DID THE OTHER BLOG……..(THURS SCREW UP)…get deleted?
It is hard for Al. The change is too wild and he is 73. Thanks AL for your work.
OWL……knows we appreciate all he does…….we just like to rib him sometimes.
Dragonite, I believe you’ve added a year.
He just had a birthday in Dec…..
Chinese always add a year. We look forward. 🙂
funny
PS. – Dragonite, thanks for making me take another look at Silvercorp a few months back. I loaded up in Jan and it has performed well on this run up.
Here’s the recent chart for Silvercorp Metals. Cha Ching!
http://stockcharts.com/h-sc/ui?s=SVMLF&p=D&yr=0&mn=3&dy=0&id=p84725110416
Excelsior, If people stop doubting it as a fraud, it will really run. It is the only small silver miner I have. It went over cdn $15 in 2011 as I remember.
Is the chart on pink sheet?
I traded the OTC on Silvercorp which has done fantastic, but you probably trade the Canadian ticker. I’ve not been concerned with the fraud noise, as I’ve been watching their cash costs and AISC come down to one of the lowest in the Silver space, like that they have multiple mines in 2 main mining complexes, and they will be raking in the free cash flows even if Silver hung out near these levels.
It is a great and very much overlooked company. Thanks man!
Good action today in Silvercorp on the OTC by the way. I trimmed some at @ $0.6988
Silvercorp Metals Inc. (SVMLF) -Other OTC
0.6879 Up 0.1025(17.51%) 3:58PM EST
good job. You picked up on the low in a decade
It just timed out that way with Silvercorp, because of when I finally got done with DD.
I initially took out a small position @ $0.4872 on 12/29/15, and then averaged down into a much larger primary position @ $0.444 on Jan 21st. I trimmed some back @ $0.6220 on Feb 9th, then added a little @ $0.5901 yesterday on the 10th, and trimmed more of that back today @ $0.6988. I now have a nice core position with a very low cost basis that I’m just going to hang onto.
If we get the spring pullback many are expecting, Silvercorp is one I’ll add to without hesitation.
FFM – Yes the Thursday blog (that had audio problems) also had like 80 comments on it and active conversations. I was hoping the Big Owl would paste those back up when the corrected audio went back up, but no dice…..
Sorry I did not realize that and will see if I can get them back. A lesson: when you are with your wife in dialysis don’t try to work on your site! A word from the now wiser Big Al
Big Al. – no worries, they were just some fun discussions that went bye bye.
You have a lot on your plate, and I sincerely wish you and Kathy all the best.
The KER site is unique and it personally is a place I learn a great deal from.
Thanks Big Al for all you do to make it all come to life.
GOLD UP BIG…………$56 …………LOOK OUT………1250 took out…….
$1262…..new number , have not seen that one for awhile.
That is amazing. Good call to Matthew.
my first 200 Agnico Eagle in TSX is sold. another half is left. This move is violent.
Kitco Website’s Gold chart unavailable (heavy traffic) …. aaaahhhhhh …. feels like 2009
GOOD ….about time……………..thanks
SILVER COMING NEXT…………….
Haven’t sold any silver.
TMM is about a triple in 3 weeks today.
I would say “look at the kitco list” if it hadnt gone down, but today is proving he high tide raises all boats.
Matters more to be “in” than what you own.
Got to be in to win……..so I agree with you.
+1
I agreed that high tide rises all boats, in a bull market. Having said that there are still stocks that didn’t move nearly as much as others on this rally.
I was making the point, that having that philosophy to just buy and hold the Kitco list in 2013, 2014, and 2015 was a bad philosophy and equated to huge losses. Being selective during that time frame on a buy and hold basis, or being even more selective if doing swing trades on counter-trend rallies allowed investors and traders to make money even in an overall bear market.
Now that the bull has begun, there are definitely going to be stocks that outperform their peers on the way up as well. Just look at how much more True Gold moved above other near term or new producers. It was a big difference and a great call by Matthew.
re: Kitco…
yeah, maybe they are on the phone with Goldman Sachs, trying to re-verify their sub $1000 call. :o)
go back go!!!!
If you think the move today was good, wait until you see what Gold does when the next iteration of QE is announced and we have negative rates.
I will stick with two predictions…
one, the price of gold and the index level for the DJIA will cross.
two, at the height of this upcoming bull market, there will be junior resource stocks that make DAILY moves higher that are greater than their entire market cap today.
Ya, there have been people suggesting $100 swings.
For some I watch, I have been noticing greater swings than in the past, so maybe its true, they do seem to be getting bigger.
Should we move up $100 in a day shares really would go thru the roof.
Unimaginable to think gold jumps that much a few days a week until we get to say….5k.
Bread might be the better bet % wise should that happen.
stocks down…………….gold up……………..