Unsustainable, but dare you fight the Fed? (from Barron's)

Diffusion

But — and yes, there is a ‘but’ — the picture is far from rosy when it comes to revenues:

44% [of companies] have reported revenue above analyst expectations and 56% reported revenue below analyst expectations. In a typical quarter (since 2002), 62% of companies beat estimates and 38% miss estimates. Over the past four quarters, 52% of companies beat estimates and 48% missed estimates.

Of the 210 companies that have exceeded their earnings estimates, 51% have missed their revenue estimate. In a typical quarter, 31% of companies that beat on earnings miss on revenue.

Harrison reports that overall earnings per share growth is 4% while revenue growth is flat.

We’ve seen this story before, haven’t we? Negligible (or worse) sales growth, but healthy (and growing) profits thanks to wider margins brought about by cost-cutting. Buybacks also help, and we’ve been seeing a lot of those recently. Ultimately, though, what we need to see to prove the economy is really recovering — higher revenues — just isn’t there.

Koesterich thinks that the stock-market bulls will ultimately win out, with investors in bonds on the losing end. “There’s no law of nature to say the 10-year can’t go back to 1.50%, but if you have a time horizon beyond the next few weeks, this is really bad value,” he says. “Even without the bond Armageddon scenarios, this is still a bad buy for most investors.”

As for Lefeuvre, he expects the S&P 500 to finish the year at 1700, suggesting more stock gains ahead, while he expects Treasury yields to eventually reverse course and finish the year around the 2% level. But he acknowledges the difficulty of trying to make such predictions in the face of the central banks’ aggressive actions.

wsjboy

oldfox

kurdamm

suifeng

hmmm. thanks for sharing, good article for reading.

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acoust