Analysts Forecast Revenue Growth To Double in 2011

This is a healthy correction proclaim the bulls, pessimism is extreme, I keep on hearing from the self-proclaimed contrarians. Everybody believes the markets will now bounce to new highs. The bears will get slaughtered. But the reality of the metrics and the market action seems to imply a different outcome, and here's just another brick to the wall of those who believe pessimism has been extreme during this super shallow correction of barely 8%.

We have now reached a completely new paradigm, a revolutionary economic model, it's a completely different world. A world in which high unemployment and rising salaries happen at the same time. A world where spending increases with unemployment.
Analysts are increasing sales forecasts for Standard & Poor’s 500 Index companies by the most in three years, compensating investors as the biggest expansion in profitability since 2002 ends.

Revenue will climb 10 percent in 2011, twice last year’s rate, as personal income and corporate spending recover, according to data from analysts compiled by Bloomberg. Net margin estimates were unchanged the past two months after rising more than 50 percent since 2009. The measure of income divided by revenue increased to 13.4 percent in the first quarter from 8.2 percent in October 2009, Bloomberg data show.
Analysts have boosted estimates for S&P 500 sales growth in 2011 to 10 percent, compared with 5.2 percent last year and a decline of 9.1 percent in 2009.
Revenue gains may push S&P 500 profits to $99.08 a share this year, up 17 percent from 2010, after rising 37 percent a year earlier, the biggest two-year expansion since 1995, analyst estimates compiled by Bloomberg show. The gauge has traded at an average 15.7 times reported earnings since the start of 2010, or 15 percent below the average for the rest of the past 10 years.

Due to the stubbornly high unemployment, lack of economic clarity and questionable self-sustainability, the multiple needs to come down,” said Chad Morganlander, a Florham Park, New Jersey-based money manager at Stifel Nicolaus, which oversees $110 billion. “Margins have reached the crescendo, so any improvement with earnings will be pushed through with sales growth. But the economy suggests only a modest improvement in sales, and so earnings improvement should be modest at best.”
Stocks will probably climb about 5.9 percent through March 2012 if history is any guide, according to Birinyi Associates Inc., which examined data on bull markets since 1962. The Westport, Connecticut-based money-management and research firm found advances typically have four stages with the biggest gains coming in the first, when economic data rebounds, and the last, when investors who missed earlier gains buy shares.
Huho. The world did not start in 1962. It started before. And hence history examined from 1962 is a very very poor decision. One that will lead to major financial losses to the people who are gullible enough to jump on the bandwagon of the incompetent bulls.


Tiho said...

"A world in which high unemployment and rising salaries happen at the same time. A world where spending increases with unemployment."

I have to completely disagree with this post. None of it makes any sense mate. Majority of S&P 500 profits come from Emerging Markets. It really does not matter how bad the US economy does... how bad unemployment is, because while the S&P 500 might be a United States share market index, majority of its profits do not come from United States.

The more money Bernanke prints and the poorer the US gets, and the more bearish people like you get, the more the stock market will surprise to the upside! I'm a bull on commodities, not on stocks, but I think you will be better of in stocks, than say... in bonds or cash, because inflation will kill you.

pej said...

Tiho, first of all, I think commodities have peaked and we'll not see new highs. I might be wrong, but I don't think we're get there.
China's construction bubble (along with India's, Australia's, and most of Europe) will pop, and the commodities demand will crash down to earth.

Bonds or cash will get killed. That's what we've been hearing for 3 years. The EUR/USD was 1.60 then, it's 1.44 today. Look at treasuries. Impossible to have lost any money holding them, with negative rates on short term ones... Killed by inflation? In a fantasy wold maybe.

Tiho said...

I remain long commodities and short 30 Year Treasuries. Commodities bull market is alive and well, it has been for 12 years already and if you think this is a peak, you won't believe yourself how high it will go in the next ten five to ten years. You obviously haven't studied any history on this topic, otherwise you would know how and why commodity bull markets end.

Treasuries have not gone down much, but they peaked in 2008 highs during the crisis. Despite the double dip fears, yields have not gone down as much as the secular low in 08. The peak is in! That is the secular top and that's why I am short as of last two weeks.

Well... That is my view only, it doesnt matter what happens, but good luck to you buddy.

p.s. EUR/USD is an exchange rate. That's not what I meant by cash.

pej said...

I have studied history dude. But it looks like you have studied history as told by Keynes, while I have studies history as told by Mises and Rothbard...

It's good to exchange ideas and share opinions nonetheless, so don't take it the wrong way mate.

And as far as luck is concerned, it looks like it's siding with you at the moment :-)