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.
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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.
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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.”
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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.