U.S.Equity Strategy:4Q Earnings Season and 2018 Outlook
U.S. Equity Strategy 4Q Earnings Season and 2018 Outlook Jonathan Golub, CFA Chief U.S. Equity Strategist (212) 325-6239 jonathan.golub@credit-suisse.com DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seek s to do business with com pani es covered in its research reports. As a result, investors should be aware that the Firm m ay have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in m ak ing their investm ent decision. January 10, 2018 Conference Call Details U.S.: (877) 317-6434 Intl: (702) 224-9787 ID: 6476508 1 Jonathan Golub, CFA | Chief U.S. Equity Strategist | (212) 325-6239 | jonathan.golub@credit-suisse.com 2017 Review Source: Standard & Poor’s, Haver Analytics®, Credit Suisse. Note: As of 12/31/17 S&P 500 Daily Mark et Moves Source: Standard & Poor’s, Haver Analytics®, Credit Suisse. Note: As of 1/9/18; Long-Term Avg is from 2009-16 # of Trading DaysYear>1%>2%All-Time Highs2009117550201076220201196350201250602013384452014386532015721010201648918201780622018006Long-Term Avg671816 2 Jonathan Golub, CFA | Chief U.S. Equity Strategist | (212) 325-6239 | jonathan.golub@credit-suisse.com 2017 Review Source: Standard & Poor’s, FactSet, Credit Suisse. Note: TECH+ includes Internet Retail from Discretionary; Disc- excludes Internet Retail 2017 Returns (Including Dividends) 2017 Returns (Including Dividends) Source: Standard & Poor’s, MSCI, FactSet, Credit Suisse. 3 Jonathan Golub, CFA | Chief U.S. Equity Strategist | (212) 325-6239 | jonathan.golub@credit-suisse.com 2017 Review Source: Standard & Poor’s, Thomson Financial, FactSet, Credit Suisse. Return Decom position – S&P 500 Return Decom position – TECH+ Source: Standard & Poor's, Thomson Financial, FactSet, Credit Suisse. Note: TECH+ includes Internet Retail from Discretionary 4 Jonathan Golub, CFA | Chief U.S. Equity Strategist | (212) 325-6239 | jonathan.golub@credit-suisse.com 2017 Review Source: FTSE Russell, FactSet, Credit Suisse. Note: Indexed to 100 on 12/31/16; As of 12/31/17 Growth vs. Value (R1000 Growth vs. R1000 Value) Factor Return of High vs. Low Tax Rate Com panies Source: Standard & Poor’s, FactSet, Credit Suisse. Note: Price returns calculated as the difference between High Tax and Low Tax Baskets derived entirely quantitatively; Indexed to 100 on 11/8/16; As of 12/31/17 5 Jonathan Golub, CFA | Chief U.S. Equity Strategist | (212) 325-6239 | jonathan.golub@credit-suisse.com Global Synchronized Recovery Source: Markit, ISM, Haver Analytics®, Credit Suisse. Note: ISM PMI for U.S., Markit PMI for all others Global PMIs Global PMIs Source: Markit, Haver Analytics®, Credit Suisse. Dec-17Dec-16Dec-14Global54.552.751.5U.S.59.754.554.9Canada54.751.853.9Japan54.052.452.0UK56.355.952.3Euro Area60.654.950.6France58.853.547.5Germany63.355.651.2Italy57.453.248.4Spain55.855.353.8Expanding ≥ 5252 > Neutral ≥ 50Contracting < 50Dec-1550.747.947.552.651.253.251.453.255.653.0 6 Jonathan Golub, CFA | Chief U.S. Equity Strategist | (212) 325-6239 | jonathan.golub@credit-suisse.com Global Synchronized Recovery Source: NFIB, Haver Analytics®, Credit Suisse. NFIB Sm all Business Optim ism Index U.S. Citi Econom ic Surprise Index Source: Citigroup, Haver Analytics®, Credit Suisse. 7 Jonathan Golub, CFA | Chief U.S. Equity Strategist | (212) 325-6239 | jonathan.golub@credit-suisse.com Global Synchronized Recovery Source: Census Bureau, National Bureau of Statistics of China, the BLOOMBERG PROFESSIONAL™ service, Haver Analytics®, Credit Suisse. Note: 6-Month Moving Average China Freight vs. U.S. Ex ports Nom inal GDP by Region Source: The BLOOMBERG PROFESSIONAL™ service, Credit Suisse. 8 Jonathan Golub, CFA | Chief U.S. Equity Strategist | (212) 325-6239 | jonathan.golub@credit-suisse.com Global Synchronized Recovery Source: BLS, Haver Analytics®, Credit Suisse. Note: Average Hourly Earnings, 1-Year Moving Average Wage Inflation Core CPI Source: BLS, Haver Analytics®, Credit Suisse. Note: YoY Percent Change 9 Jonathan Golub, CFA | Chief U.S. Equity Strategist | (212) 325-6239 | jonathan.golub@credit-suisse.com Earnings & Taxes Source: Standard & Poor’s, Thomson Financial, FactSet, Credit Suisse. Note: Typical path is revisions for 2010-16; Indexed to 100 on Dec 31 Annual EPS Revisions Consensus EPS Growth (For Illustrative Purposes) Source: Standard & Poor’s, Thomson Financial, FactSet, Credit Suisse. Note: Based on bottom-up consensus expectations as of 12/31/17 CalculationActual2017 consensus EPS$1322018 consensus EPS before tax changesEPS$146Implied growth rate($146/$132)-1=10.6%Implications of tax changesPretax income at 27% effective rate$146/(1-27%)=$200EPS assuming 21% effective rate$200*(1-21%)=$158Benefit of tax change($158/$146)-1=8.2%Implied growth at new tax rate($158/$132)-1=1
