Förväntningarna på vinsternas utveckling ligger alldeles för högt vilket kommer att straffa sig med ett kraftigt fall på börsen.
To visualize the current extremes in earnings estimates, we can view the long term cyclicality of earnings. As shown in the next chart, earnings tend to cycle regularly between 6% peak to peak and 5% trough to trough growth in earnings. With 2015 expectations exceeding the current 6% peak to peak growth rate, it is only a question of what will trip up this overly optimistic picture.
Currently, estimates for the end of 2014 have once again began to get knocked down. At the beginning of 2013 it was estimated that 2014 would end at $121.40 versus the June, 2014 estimate of just $114.39. However, just three months later, the 2014 year-end estimate has been reduced to just $110.10. Currently, as of the end of November, that year-end estimate is sitting at $109.67 as economic growth has once again failed to materialize as expected.
Since 2009, the reported earnings per share of corporations has increased by a total of 268%. This is the sharpest post-recession rise in reported EPS in history. The issue is that the sharp increase in earnings did not come from a similar surge in revenue that is reported at the top line of the income statement. Revenue from sales of goods and services has only increased by a marginal 33% during the same period.