Gavekal Capital: Earnings Revisions Are Negative For A Majority Of Companies

Monday, June 16, 2014

Earnings Revisions Are Negative For A Majority Of Companies

60% of stocks in the MSCI World Index have experienced negative EPS revisions for the next fiscal year (FY1). Only two sectors, Financials and Information Technology, have at least half of their companies raising FY1 EPS estimates. While only 1 in 5 Telecom stocks and 1 in 4 Consumer Staples stocks have a had positive revisions over the past six months.

Sales revisions are slightly better. 46% of all stocks have seen their FY1 sales revised upwards and four sectors (Utilities, Health Care, Energy, IT) have at least half of their companies experiencing positive revisions. Consumer Staples again finds itself near the bottom of the barrel. 69% of all Consumer Staple stocks have had their sales revised downward over the past 6 months.

Energy stocks continue to have the highest growth hurdle rates over the next four years. On average, the Energy sector is expected to grow sales by 8.9% per year for the next four years and it is expected to grow EPS by 16.3% per year for the next four years. Put another way, Energy earnings are expected to almost DOUBLE in the next four years.

About Gavekal Capital

Gavekal Capital is a US registered investment advisory firm that manages the Gavekal Knowledge Leaders Strategy. Knowledge Leaders are a group of the world’s leading innovators with deep reservoirs of intangible capital. These companies often possess competitive advantages such as strong brand, proprietary knowledge or a unique distribution mechanism. Knowledge Leaders are largely service-based and advanced manufacturing businesses, often operating globally. Gavekal Capital seeks to identify the world’s leading knowledge companies through a proprietary process that analyzes corporate knowledge investments.
We offer the Gavekal Knowledge Leaders Strategy in multiple products for global investors. For more information about our product offerings please visit http://www.gavekalcapital.com.
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Disclosure

The information presented here is for informational purposes only, and this document is not to be construed as an offer to sell, or the solicitation of an offer to buy, securities. Some investments are not suitable for all investors, and there can be no assurance that any investment strategy will be successful. An investor cannot invest directly in an index. Hyperlinks may be included in this message that provide direct access to other internet resources, including web sites. While we believe these links are to reliable sources, Gavekal has no control over the accuracy or content of information contained on these sites. Although we make every effort to ensure such links are accurate, up to date and relevant, we have no control over pages maintained by external providers. The views expressed by these external providers on their own web pages or on external sites they link to are not necessarily those of Gavekal.
The information listed on this blog is for example purposes only and should not be construed as the investment Advisor's opinion or investment outlook. As of the most recent quarter end, the named companies may have been held by the investment Advisor. Please review the most recent disclosures. For full information including additional policies and full disclosures on the Advisor, please visit our website gavekalcapital.com.