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Welcome to the latest episode of Reading The Markets with Mike Kramer and Jane King, recorded at the Nasdaq market site in Times Square. We just finished up the first quarter of 2017 and the earnings throughout have been excellent this quarter, except retail, which has been getting hammered because Amazon ($AMZN) is just eating their lunch. When you look at the actual numbers, the latest statistics through the first week of May showed about 400 or so companies had reported earnings and nearly 74 percent of them had beaten their estimates. Even revenue growth has been here this quarter, which is up six or seven percent on the S&P 500 ($SPY) this year versus last year. The latest earnings imply the markets might have further to go in 2017, even though we’ve been on this incredible run. When you start looking at the S&P 500 ($SPX), and you start thinking about earnings going forward, we see estimates around $132 a share in 2017, and $140 or so in 2018. This gives us an S&P 500 trading at 16, 17, 18 times forward. All these people they’re looking at these trailing -twelve month PE multiples and they’re seeing higher numbers, but they need to remember we’re coming out of a massive earnings recession. The trailing numbers aren’t indicative of what the future growth is, and the market, of course, is always we’re looking forward.
The surprises of the quarter or at least the most exciting development has been a trend a global recovery in earnings. A perfect example is Unilever ($UL, $UN), this quarter showed they not only had pricing improvement but volume improvements as well. Unilever makes all the basics, all the necessities, and personal hygiene products. In the emerging markets, they had five percent pricing increases, but they also had two to three percent volume increases so they’re raising prices and they’re still selling more goods. This paints a picture of an economy that’s pretty strong out there.
Look at for projections in the S&P 500 we come to a year-end target range of 2500 to 2550 by December. Which still only gets you to an S&P 500 to around to 18 times earnings. That is it for the latest episode of Reading The Markets with Mike and Jane.
Michael Kramer and the clients of Mott Capital Management, LLC own shares of UL. Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request the advisor will provide a list of all recommendation made during the past twelve months. Past performance is not indicative of future performance.
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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.