While valuation multiples are flying into the wild blue yonder, revenues and earnings have been coming back down to earth. But that's all because of the crash in the energy sector. Excluding this sector, the skies are still relatively sunny. Nevertheless, investors have to beware of repeating the fate of Greek mythology's Icarus, who flew too close to the sun, melting the wax on his homemade wings and sending him into the sea. It was the first meltdown recorded in human history. Let's have a closer look at the data:
(1) Revenues: The year-over-year growth in S&P 500 revenues, as compiled by Thomson Reuters I/B/E/S estimates, is highly correlated with the comparable growth in manufacturing and trade sales. The former was down 1.8% year-over-year through Q1, while the latter declined 2.4% through March. However, excluding petroleum products, business sales rose 2.4% year-over-year. Petroleum-related sales plunged 31.7% through March.
(2) Earnings: Thomson Reuters I/B/E/S calculates that S&P 500 earnings fell 6.3% quarter-over-quarter to $28.58 per share during Q1. It was up just 1.4% year-over-year. Excluding the energy sector, Q1 earnings rose 11.5%. The following sectors had very strong results: health care (19.8%), financials (19.5%) and tech (11.2%).
Source: Ed Yardeni — Ed Yardeni is the president and chief investment strategist of Yardeni Research Inc., a provider of independent investment strategy and economics research for institutional investors.