5/15/2017
By Charles Payne, Principal Analyst

The earnings season wrapped up last week, and it has been better than advertised: 

• 91% Companies reported
• 64% Beat on revenue
• 75% Beat on earnings per share
• 7% Reported eps in line
• 18% Companies missed
• 13.6% Blended earnings growth rate (best since 3Q11 16.7%)
• 9 of 11 Sectors: faster growth rates since March 31st

In this tense period of potential trade wars and skirmishes and questions about the strength of the U.S. Dollar, it must be pointed out that companies with more than 50% of revenue outside of the United States (OUS) grew bottom lines two times faster than the others.

• 50% Sales in USA Revenue +7.1% EPS +9.9%
• 50% Sales OUS Revenue +9.4% EPS +20.9%
• Valuation Worries

It’s obvious this has been a miserable earnings season for companies that missed or issued even a slight change to guidance. A part of the reason is the extent of the market rally and the herd mentality that runs amok when there is confusion or disappointment. That’s why earnings beats resulted in four-day rallies of only 1.1% versus the 1.3% five-year historical average and misses that saw stock valuations drubbed by 3.1% instead of a historical average of -2.4%.

Right now, the forward S&P 500 price-to-earnings (P/E) is 17.5, which is two percentage points higher than the average from recent years.

Estimates for the remainder of the calendar year bode well for current and even higher valuations.

This Week’s Key Earnings Report (company and consensus)

Retail:

• (HD) Home Deport: $1.61
• (TJX) TJX Companies: $0.79
• (WMT) Wal-Mart: $0.96
• (RL) Ralph Lauren: $0.79
• (GPS) Gap Inc.: $0.29
• (ROST) Ross Stores: $0.80
•  (FL) Foot Locker: $1.38

Restaurants:

• (JACK) Jack in the Box Inc.: $0.91
• (RRGB) Red Robin Gourmet Burgers: $0.58

Tech:

• (CSCO) Cisco Systems: $0.53,
• (AMAT) Applied Materials: $0.76,
• (ADSK) Autodesk Inc.: $0.36
• (CRM) Salesforce.com:  $0.05

Misc.:

• (DE) Deere & Company: $1.64
• (RXN) Rexnord Corp.: $0.33

Charles Payne
Wall Street Strategies

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