EV Forward: Earnings & Valuations

Timely insights from portfolio managers and industry experts on key financial, economic and political issues.

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Eaton Vance are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance strategy. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness.

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      By Yana S. Barton, CFACo-Director of Growth Equity, Eaton Vance Management

      Boston - While a majority of companies have posted better-than-feared results and bested sales estimates, third-quarter earnings expectations have been reset lower, with blended earnings growth projected to decline for the third quarter in a row.

      The stronger U.S. dollar and the ongoing strains of trade tensions and the slowing global economy are the primary culprits cited for the lackluster results and muted confidence.

      Median company earnings per share (EPS) and sales growth rates, however, remain positive for the third quarter and calendar year end, suggesting to us that stock selectivity remains prudent.

      Stocks appear fairly valued on a historical basis, but we find value in equities compared to bonds: Whether measured by earnings, cash flow or dividends, the yield on the S&P 500 Index exceeds the current yield on 10-year Treasuries.

      As long as growth remains elusive, we maintain our focus on the secular growers — stocks of companies driving and benefiting from disruptive long-term change — that should continue to excel.