HOUSE_OVERSIGHT_025239.jpg
1.51 MB
Extraction Summary
0
People
7
Organizations
3
Locations
2
Events
0
Relationships
4
Quotes
Document Information
Type:
Financial market report / investment analysis
File Size:
1.51 MB
Summary
This document is a page from a financial market analysis report, likely dating to around April 2012 based on the charts ending in late March 2012. It analyzes US bank stability compared to European counterparts, S&P 500 P/E multiples driven by Apple, and earnings revisions. The author expresses specific concern regarding the economic stability of Spain, noting its history of defaults and likely need for ECB financing. The document bears a 'HOUSE_OVERSIGHT' stamp, indicating it was part of a document production for a congressional investigation.
Organizations (7)
| Name | Type | Context |
|---|---|---|
| Morgan Stanley |
Cited as source for US bank price to book ratio data and analyst forecasts regarding 2013 margin expansion.
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| Standard & Poor's |
Source for S&P 500 data.
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| Apple |
Mentioned as a significant driver of S&P returns (3% of index, 15% of YTD returns).
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| IBES |
Source for S&P 500 P/E multiple chart.
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| FactSet |
Source for EPS revisions chart.
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| ECB |
European Central Bank, mentioned in context of potential financing needed for Spain.
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| Datastream |
Cited in US bank price to book ratio chart.
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Locations (3)
| Location | Context |
|---|---|
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Context of US banks and S&P 500 data.
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Comparison of bank capital adequacy; mention of structural problems.
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Identified as a major concern due to poor growth outlook and historical defaults.
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Key Quotes (4)
"Most US banks are at or close to Basel 3 funding needs, have considerably fewer capital adequacy questions than their European counterparts"Source
HOUSE_OVERSIGHT_025239.jpg
Quote #1
"The return on the S&P this year has been a function of P/E multiples rising (from 11.3x to 12.9x), a big part of which has been Apple"Source
HOUSE_OVERSIGHT_025239.jpg
Quote #2
"The place that worries me the most: Spain."Source
HOUSE_OVERSIGHT_025239.jpg
Quote #3
"Spain has defaulted 13 times since 1500 AD; it’s probably going to take a lot of bilateral aid and ECB financing to prevent another one."Source
HOUSE_OVERSIGHT_025239.jpg
Quote #4
Full Extracted Text
Complete text extracted from the document (1,901 characters)
drive income, and ongoing regulatory uncertainty. Most US banks are at or close to Basel 3 funding needs, have considerably fewer capital adequacy questions than their European counterparts, and do not rely on wholesale funding to finance loan portfolios.
S&P 500 ex-bubble price to earnings multiple
Price to next twelve months operating EPS
24x
22x
20x
18x
16x
14x
12x
10x
8x
1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
Source: IBES, Standard & Poor's.
Price to next twelve months operating EPS
24x
22x
20x
18x
16x
14x
12x
10x
8x
1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
Source: IBES, Standard & Poor's.
US bank price to book ratio
4.5x
4.0x
Datastream
3.5x
3.0x
2.5x
2.0x
Morgan Stanley
1.5x
1.0x
0.5x
0.0x
1969 1973 1977 1981 1986 1990 1994 1998 2002 2006 2010
4.5x
4.0x
Datastream
3.5x
3.0x
2.5x
2.0x
Morgan Stanley
1.5x
1.0x
0.5x
0.0x
1969 1973 1977 1981 1986 1990 1994 1998 2002 2006 2010
Now that P/E multiples have risen off the bottom, what’s the outlook for P/E multiples and earnings from here?
The return on the S&P this year has been a function of P/E multiples rising (from 11.3x to 12.9x), a big part of which has been Apple (3% of the S&P index, 15% of S&P’s YTD returns). As shown below, earnings revisions have been negative for 2012, but analysts are still optimistic about 2013. According to Morgan Stanley, analysts are forecasting the highest percentage of companies posting 2013 margin expansion since 1970, and by a very wide margin. In our view, it will be difficult for multiples to rise further unless earnings outperform expectations, particularly if Europe’s structural problems take center stage again.
The return on the S&P this year has been a function of P/E multiples rising (from 11.3x to 12.9x), a big part of which has been Apple (3% of the S&P index, 15% of S&P’s YTD returns). As shown below, earnings revisions have been negative for 2012, but analysts are still optimistic about 2013. According to Morgan Stanley, analysts are forecasting the highest percentage of companies posting 2013 margin expansion since 1970, and by a very wide margin. In our view, it will be difficult for multiples to rise further unless earnings outperform expectations, particularly if Europe’s structural problems take center stage again.
Revisions to consensus EPS by quarter
Index, 12/30/2011 = 100
101
4QE+1%
100
3QE-1%
99
FY12-1%
98
2QE-2%
97
1QE-3%
96
12/30/2011 01/31/2012 02/29/2012 03/28/2012
Source: FactSet.
Index, 12/30/2011 = 100
101
4QE+1%
100
3QE-1%
99
FY12-1%
98
2QE-2%
97
1QE-3%
96
12/30/2011 01/31/2012 02/29/2012 03/28/2012
Source: FactSet.
The place that worries me the most: Spain. It ranks at or close to the bottom in a lot of categories (see table), and its growth outlook is poor. Historically, this kind of thing has not ended well. Spain has defaulted 13 times since 1500 AD; it’s probably going to take a lot of bilateral aid and ECB financing to prevent another one.
HOUSE_OVERSIGHT_025239
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