ETF Trends
ETF Trends

With 95% of EPS reported and approximately 80% of the data items collected via S.E.C. documents:

Buybacks:
Buybacks are on track to be the second highest on record, as more companies do Share Count Reduction (SCR), therefore giving their EPS a tailwind. With over 90% of the issues reported, 119 issues have decreased their share count by at least 1%, with 25 increasing them at least that amount. For the Q1 2014 EPS period, 95 issues added at least a 4% EPS increase via a reduction of at least 4% in their average diluted share count, which is used for EPS calculation. Looking ahead to the Q2 2014 reporting season (off fiscals start in three weeks), I found 73 issues which have at least a 4% tailwind based on their Q1 2014 shares compared to their Q2 2013 shares – which (obviously) excludes any Q2 2014 share reduction. Keep in mind while it is easy to find issues which have enhanced their EPS via SCR (ie: 5% net income increase with a 10% EPS increase), the S&P 500 index adjusts for share counts, therefore limiting the impact of buybacks on index level EPS. Also, of a small, but growing concern on my side, are estimates which are not adjusted for share counts – therefore under estimating the EPS (net / larger share count), making the initial release appear as a beat. Analyst’s appear much more conscious of this than they were in 2006/7, but it is still an open issue.

Cash:
It had to happened – after six record quarters of cash holdings, S&P 500 Industrials (Old) are running 6% below Q4,’13, and could be less than Q3,’13 (making it the third highest). Cash levels are running at 8.9% of market value, and 90 weeks of the current 12 month net income – and earning very little as it sits on the side (attracting activists). Haven’t run cash-flow yet (one of the last items).

Capital Expenditures:
CapX is running 7% above Q1,’13, and 15% less than Q4,’13 (Q4,’13 was a record and Q1 typically runs lower). Oils and telecoms still dominate the expenditure. Don’t have a breakdown on the type of Q1 expenditure, but through 2013 it was mostly maintenance and related improved productivity items – no new plants or shifts (with the exception of the re-opening/re-expanding autos).

Pensions & OPEB:
A 29.6% stock gain for the S&P 500 and mixed interest rates combined to reduce pension funding (YTD 2014 has lower returns and lower interest rates). S&P 500 pensions appear to have cut their 2012 $451 billion record deficit in half. OPEB, which remains massively underfunded and is a pay-as-you-go expense, has improved, but is still less than 30% funded (note in WSJ on who pays for ACA). Combined, the $686 billion in underfunding from last year is coming in near the $400 billion area. More companies are fully funded, but still a minority. The discount rate up running 74 bps higher, with return rate down 20 bps.

Foreign:
Looks like 2013 was a tick higher on foreign sales, to the 47-48% level; still poor reporting.

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