Las bolsas bajarán porque los beneficios se están moderando

Corporate Earnings Growing 17% in Q3? No Way! Rather Slowing Sharply to At Most 8.5%
https://www.rgemonitor.com/blog/roubini
Nouriel Roubini | Oct 31, 2006

One of the recent mysteries about the US economy is the question of how come reported corporate earnings (say for S&P500 firms) have been growing so rapidly when GDP has decelerated so fast from 5.6% in Q1 to 1.6% in Q3. Part of the answer could have been the sharp increase in the share of profits in GDP that we have experienced in the last few years but the just reported 17% growth in earnings in Q3 for S&P500 firms seems too large compared to the 1.6% growth of the economy.

The answer to this puzzle has come out today in a note ("Corporate earnings- Are they really running in double-digits?") by David Rosenberg, the chief US economist for Merrill Lynch and one of the few Wall Street economists who has written serious and detailed bearish analyses of the economy. With his estimated probability of a recession in 2007 now possibly as high as 80% Rosenberg could even be taken as being even more bearish than me (as my subjective probability of a recession is still 70%).

Regarding corporate earnings, Rosenberg shows that the 17% earnings growth figure for Q3 is meaningless and misleading - compared to Q3 GDP growth of 1.6% - for several reasons: it isa year-on-year growth measure while GDP is a quarter-on-quarter annualized measure; it is distorted by the fact that in Q3 of 2005 earnings fell because of the Katrina effect; it is distorted as it is a earnings per share (EPS) measure; it does not correct for seasonality. Once Rosenberg appropriately adjust the data, actual seasonally adjusted annualized growth of rate of earnings in Q3 was only 8.5% not 17%. And if you were to make an inflation adjustment, real earnings would be growing even less than 8.5%. Not only is earnings growth much lower than the 17% headline figure but it path in the last few quarters is showing a sharp deceleration: in Q4 of 2005 annualized earnings growth was almost about 19%; it decelerated to about 16% in Q1 of 2006 and to about 14% in Q2; and it has now sharply fallen to 8.5% growth in Q3. This is a very sharp deceleration of earnings growth that is very consistent with the sharp deceleration of the economy in 2006.

Going beyond the excellent analysis of Rosenberg, note also that, among the S&P500 firms, a large fraction of the earnings growth in 2006 has come from energy firms and financial sectors firms; outside these two sectors earnings growth is significantly lower. Moreover, given the recent sharp downward revisions of profits in national income accounts for Q1 and Q2, it must be the case that earnings growth outside the S&P500 companies is even worse than that of the ex-energy and financial earnings of the S&P500 firms.

So, there is no mystery. The economy is sharply slowing down and earnings growth is sharply falling. These revised lower measures of earnings growth are also consistent with the "investment strike" of the US corporate sector: why firms have been investing so little in new real capital spending if their earnings growth is so rapid as the headline figures allege? The reality is that the corporate emperor has no clothes or it is at least half naked: earnings growth is rapidly slowing down and it will fall further in Q4 and 2007 as the economy spins into a hard and ugly recession. And, as I have analyzed before, in an a typical recession the S&P500 falls by an average of 28%. So, the end of the sucker rally is getting closer. The recent bombardment of bad macro news on Q4 in the last two weeks has definitely broken the momentum of US equities in the last week; the myth of a Q4 growth rebound - after a dismal Q3 -is now rapidly fizzling away. Wait for a few more indicators and the sucker rally will melt faster than you can watch it.

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Las muestras de que el enfriamiento económico puede ser más fuerte de lo esperado se suceden un dato macreconómico tras otro. El ISM manufacturero nos da una bajada de 52,9 a 51, 2, es decir el nivel más bajo desde el mes de junio del año 2003, creo que con esto está dicho todo, teniendo en cuenta que este indicador tiene fama de ser uno de los mejores indicadores adelantados del mercado para anticipar los períodos de fuerte enfriamiento. Afortunadamente para las bolsas la cifra no ha rebasado el nivel de 50, que se considera el nivel de contracción, ya que en ese caso hubiéramos podido tener un disgusto. La buena noticia es que aunque bastante peor de lo esperado, que era un nivel de 53, por lo menos se sigue estando por encima del nivel 50.

Además el dato de empleo mejora desde 49,4 hasta 50,8, volviéndose a meter aunque por los pelos, de nuevo por encima del nivel de expansión con nivel de 50.

Una muy buena noticia la trae esta cifra desde el punto de vista de la inflación, ya que la partida de precios pagados baja desde 61 a 47,1 bajada muy fuerte, y que muestra bien a las claras que la inflación está bajando muy violentamente gracias al descenso del precio del petróleo.

Si no tengo mal mi archivo, este sería el indicador de precios pagados más bajo desde febrero del año 2002

En suma podríamos decir que dato malo para la economía, yo diría que dato peligroso, muy peligroso, es muy importante ver qué sucede en los próximos meses y si se rebasa o no ese nivel fatídico de 50, aunque al menos en parte tiene cosas buenas, como está muy fuerte bajada del indicador de precios pagados y la mejora del empleo por encima de 50.

Así que lo dejamos en moderadamente malo para las bolsas a las que le viene mal el nivel de crecimiento que indica, pero bien la fuerte bajada de la inflación, en muy bueno para los bonos a los que les viene bien las dos partidas y en muy malo para el dólar al que le vienen mal ambas partidas.

Los datos de gastos de construcción y de Pending Home INDEX, también han salido peor de lo esperado, con lo que refuerzan el mismo mensaje: la inflación se está controlando, pero el crecimiento se está tambaleando peligrosamente muy perjudicado por el pinchazo de la burbuja inmobiliaria.

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