(NWSA) Q4 S&P Earnings to More than Double – Earnings Trends

December 8th, 2009

Key Points:
•    Earnings Surprise Ratio (#beat/#miss) at 5.28, almost double normal
•    Median Earnings Surprise 7.14%, very strong
•    Year-over-year Earnings Growth Ratio (# Pos Growth/# Neg Growth) at 0.81
•    Sales Surprise Ratio at 1.45
•    Sales Growth Ratio at just 0.43
•    Total Net Income for S&P 500 reported is 11.1% below a year ago, 10.7% above what was earned in 2Q09
•    Total S&P 500 Revenues reported down 10.8% year over year, up 3.6% from 2Q09
•    2009 Earnings Revisions ratio for full S&P 500 falls to 2.42, down from 3.00 two weeks ago (report was not run due to Thanksgiving last week), still very high
•    2010 ratio at 1.77, down from 1.98 two weeks ago
•    S&P500 expected to earn $574.1 billion in 2008, $707.3 billion in 2010
•    Bottom Up estimates: $62.84 for 2009, $77.89 for 2010
•    Top Down estimates: $54.38 for 2009, $70.05 for 2010

Welcome to the new Earnings Trends. We have decided to start focusing our analysis of the S&P 500 based on Zacks’ own sector groupings rather than the S&P GICS sectors. There are 16 Zacks sectors and only 10 GICS sectors, so the new groupings will result in better granularity of the data. The old way simply grouped too many very different companies together. In addition, we for the first time are presenting top-line as well as bottom-line expectations and surprise information. This is very much or a work in progress, and we will be adding additional information, tables and perhaps even some graphs over the next few months.

The third quarter was a fantastic earnings season. With almost all of the reports in, there have been 375 which have exceeded expectations while only 71 have fallen short, a ratio of 5.28. While it is true that most companies will normally try to under-promise and over-deliver, this quarter the beats are beating the misses by about twice the normal margin of 3:1.

Nor have all the surprises only been by a penny or two, but there have been lots of companies that simply crushed their earnings estimates. The median surprise is a very high 7.14%. Over the last five years, a median surprise of about 3.0% has been normal.

Part of the reason is that expectations were set very low going into the earnings season. For most companies, their earnings are still below year-ago levels, just not as far down as people thought they would be. Only 220 firms have posted positive year-over-year growth versus 272 which have fallen short of year-ago levels, a ratio of 0.81.

Now it is time to turn our focus to the fourth quarter. Saying that the market as a whole faces easy year-over-year comps is a bit like Noah remarking that it looks like it may rain. Total earnings in the fourth quarter are expected to be more than double year-ago levels, up 119.8%.

However, the growth is very much concentrated in a few sectors, most notably the Financials, but with a nice assist from the Autos and Construction (although those sectors are far smaller). Consumer Staples also is expected to show extremely high growth largely due to massive year-ago losses at News Corp (NWSA), on what is arguably a non-recurring item (the data is adjusted to remove non-recurring items, but it looks like we slipped on that one).

Because of the year-over-year distortion from the debacle that was last year’s fourth quarter, it is more instructive to look at the sequential growth (although keep in mind that some sectors, most notably Retail, are highly seasonal). There the picture is far more subdued, with total earnings in the fourth quarter actually expected to be 4.1% below third quarter levels. Although if we see even a normal amount of positive surprises, the level is probably going to be more like flat sequentially.

Aerospace is expected to be the sequential leader, but keep in mind that it was awful on a sequential basis in the 3Q, so that is not real strong evidence of a big underlying growth trend there. In all, 11 of the 16 sectors are expected to post lower total earnings in the 4Q than in the 3Q.

On the top line it was also a successful reporting season relative to expectations, but in terms of actual year-over-year growth it has been downright ugly. The total revenues were 10.8% below year-ago levels. A total of 276 firms reported higher-than-expected revenues, versus 190 that have disappointed, for a ratio of 1.45. On the other hand, only 147 actually had higher sales than a year ago, versus 345 with lower revenues — a ratio of 0.43.

Put another way, only 29.7% of all firms reporting so far have had higher sales than a year ago. However on a sequential basis, revenues did rise by 3.6%. Looking forward, in the fourth quarter revenues are expected to be up by 2.7% sequentially and by 1.8% year over year.

In other words, cost-cutting has been the major force driving earnings, and earnings surprises. However, the costs to one company are either the revenues of another company or someone’s paycheck, which is then spent to create revenues for firms.

The bottom-up data coming out of all these individual firms seems to confirm what we have been getting from the macro statistics from the government. The economy is growing due to increases in productivity. Higher GDP with fewer workers. While clearly companies cannot continue to grow earnings forever based only on cost cutting, it does mean that when they do start to see revenue growth, earnings growth could be explosive as the greater operating leverage kicks in.

The strategy seems to be working as earnings are coming in much better than expected and analysts have responded by increasing earnings estimates for 2009. The estimate increases are widespread across sectors, with four sectors seeing more than four increases for each cut. No sector is seeing more cuts than increases.

For the S&P 500 as a whole the revisions ratio now stands at 3.42, which while slightly lower than a few weeks ago is still very high, and in distinct contrast to earlier in the year when it fell below 0.15 at one point. The better-than-expected earnings are translating into estimate increases for 2010 as well as 2009, with a revisions ratio of 1.77 for next year. While the total number of revisions is coming down (seasonally normal) the ratio is still quite bullish.

Scorecard & Earnings Surprise
•    Season almost over, 493, or 98.6% of reports in
•    Data presented reflects only firms that have reported so far
•    Reports so far extremely positive relative to expectations
•    Earnings Surprise Ratio (#beat/#miss) at 5.28
•    Perfect: Conglomerates, 8 positive surprises, no disappointments. Business Services 7 and 0
•    Almost perfect: Medical with a ratio of 35 to 1, Industrials 20:1
•    Median Earnings Surprise 7.14%, very strong reading
•    Year-over-year Earnings Growth Ratio (# Positive Growth/# Negative Growth) at 0.81
•    Massive positive surprises in cyclical Construction, Industrial and Discretionary sectors

In evaluating the data presented here, keep the percent reported in mind, for some sectors the sample size is extremely small. The move to the 16 Zacks sectors means that even when all reports are in, some of the sectors will still have relatively few firms in them. For firms with only a few reports in, the median surprise will be very volatile as new firms are added to the sample.

Overall, two small sectors, Conglomerates and Business Services, appear to have the most impressive performance so far this quarter on the surprise front. Among the larger sectors, strong arguments could be made for Staples having the best surprise profile, although Industrials are also in contention.

Scorecard & Earnings Surprise
Income Surprises	Yr/Yr Growth	% Reported	Surprise Median	EPS Surp Pos	EPS Surp Neg	# Grow Pos	# Grow Neg
Conglomerates	-21.64%	100.00%	16.41	8	0	1	8
Industrial Products	-29.20%	95.45%	15.15	20	1	9	12
Consumer Discretionary	-14.07%	100.00%	12.10	22	5	8	22
Construction	76.05%	100.00%	11.85	6	4	5	6
Business Service	6.73%	88.89%	11.80	7	0	2	6
Consumer Staples	2.39%	97.73%	10.20	39	4	30	13
Computer and Tech	-10.20%	96.39%	7.69	56	7	32	48
Aerospace	-59.63%	100.00%	6.74	8	2	4	6
Basic Materials	-47.72%	100.00%	6.73	14	4	4	16
Retail/Wholesale	3.02%	97.83%	5.94	37	5	25	20
Utilities	5.56%	100.00%	5.63	27	8	23	14
Medical	3.62%	100.00%	5.63	36	1	34	9
Finance	391.46%	100.00%	5.41	56	16	38	40
Oils and Energy	-62.90%	100.00%	4.84	29	10	2	39
Transportation	-36.21%	100.00%	3.09	7	2	1	9
Auto	178.53%	100.00%	1.54	3	2	2	4
S&P	-10.76%	98.60%	7.14	375	71	220	272

Sales Surprises
•    Sales Surprise Ratio at 1.45
•    Staples missing on Sales even as they beat on earnings
•    Tech looks terrific, 3.26 sales surprise ratio
•    Sales Growth Ratio at just 0.43
•    Most Tech firms have declining sales, but less of a drop than expected
•    Under 30% of all firms reporting have higher revenues than last year

Sales Surprises
Sales Surprises	Yr/Yr Growth	% Reported	Surprise Median	Sales Surp Pos	Sales Surp Neg	# Grow Pos	# Grow Neg
Computer and Tech	-6.30%	96.39%	2.37	62	19	18	63
Finance	4.92%	100.00%	1.28	32	11	35	7
Medical	22.49%	100.00%	1.23	33	19	33	44
Auto	-11.31%	100.00%	1.08	6	0	0	6
Consumer Discretionary	-10.07%	100.00%	0.92	21	9	7	23
Business Service	-6.73%	88.89%	0.84	5	3	3	5
Retail/Wholesale	1.27%	97.83%	0.66	31	14	24	21
Conglomerates	-40.57%	100.00%	0.46	23	18	3	38
Oils and Energy	-16.29%	100.00%	0.45	5	3	1	8
Basic Materials	-28.79%	100.00%	0.25	11	9	1	19
Industrial Products	-19.57%	95.45%	0.03	11	10	1	20
Consumer Staples	-6.47%	97.73%	-0.12	18	24	11	32
Transportation	-19.93%	100.00%	-0.36	3	7	0	10
Construction	-27.47%	100.00%	-1.35	4	7	0	11
Aerospace	4.64%	100.00%	-1.73	3	7	7	3
Utilities	-18.59%	100.00%	-12.59	8	30	3	35
S&P	-10.79%	98.60%	0.53	276	190	147	345

Reported Quarterly Growth: Total Net Income
•    Massive 391.5% growth in Financials due to low year-ago base, earnings up 3.1% from 2Q09
•    Total Net Income for S&P 500 reported was 10.8% below a year ago, 10.7% above what they earned in 2Q09
•    Going into the quarter, a decline of 23% was forecast for total year-over-year earnings
•    Positive yr/yr growth for 8 sectors, negative for 8 — Energy, Aerospace and Materials lag
•    Materials down hard year over year in second and third quarters, but expects huge rebound in the 4Q
•    Total net earnings in 4Q expected to be more than double year-ago earnings, mostly due to Finance turnaround, but sequentially total earnings expected to decline 4.1%

Reported Quarterly Growth: Total Net Income
Income Growth	Sequential Q4/Q3 E	Sequential Q3/Q2 A	Year over Year 3Q 09 A	Year over Year 4Q 09 E	Year over Year 2Q 09 A
Finance	-32.87%	3.05%	391.46%	- to +	-4.11%
Basic Materials	-19.02%	50.30%	-47.72%	481.81%	-69.62%
Consumer Staples	-12.03%	9.84%	2.39%	120.54%	-0.02%
Construction	-9.10%	-24.52%	76.05%	69.70%	44.84%
Computer and Tech	15.02%	13.88%	-10.20%	18.22%	-20.30%
Retail/Wholesale	25.46%	-6.10%	3.02%	14.78%	-4.86%
Aerospace	148.45%	-60.94%	-59.63%	4.56%	-1.53%
Consumer Discretionary	-0.35%	24.55%	-14.07%	2.90%	-18.18%
Business Service	-14.02%	12.48%	6.73%	2.22%	-1.93%
Utilities	-38.02%	46.82%	5.56%	-1.59%	-2.02%
Medical	-7.99%	5.10%	3.62%	-4.63%	1.71%
Auto	-25.67%	435.49%	- to +	-5.25%	-264.23%
Conglomerates	-12.99%	-1.66%	-21.64%	-8.97%	-29.50%
Industrial Products	-24.85%	7.35%	-29.20%	-27.44%	-41.62%
Oils and Energy	6.36%	26.05%	-62.90%	-28.26%	-67.13%
Transportation	2.73%	11.58%	-36.21%	-30.07%	-35.44%
S&P	-4.10%	10.66%	-10.76%	119.78%	-25.29%

Reported Quarterly Growth: Total Revenues
•    Total S&P 500 Revenues down 10.9% year over year, up 3.43% from 2Q09
•    Year-over-year revenue expected to turn positive in 4Q with 1.50% increase
•    Energy, Autos see large yr/yr declines but the biggest sequential increases
•    Finance clear yr/yr winner, Medical, Aerospace up modestly
•    Four sectors posting positive yr/yr revenue growth, 12 sectors negative
•    Sequentially, only Staples and Conglomerates see minor declines

Reported Quarterly Growth: Total Revenues
Sales Growth	Sequential Q4/Q3 E	Sequential Q3/Q2 A	Year over Year 3Q 09 A	Year over Year 4Q 09 E	Year over Year 2Q 09 A
Finance	-15.51%	2.40%	22.49%	23.54%	4.04%
Aerospace	6.77%	-2.14%	4.64%	12.68%	2.18%
Medical	4.52%	0.83%	4.92%	8.85%	2.88%
Utilities	12.42%	10.93%	-18.59%	6.56%	-14.02%
Retail/Wholesale	9.56%	0.48%	1.27%	4.43%	-0.78%
Computer and Tech	5.60%	3.91%	-6.30%	3.07%	-9.21%
Auto	-2.63%	11.74%	-11.31%	0.99%	-30.07%
Busines Service	-1.39%	3.00%	-6.73%	-3.42%	-10.84%
Basica Materials	-0.04%	5.31%	-28.79%	-3.45%	-34.50%
Consumer Discretionary	4.57%	7.28%	-10.07%	-5.18%	-14.18%
Consumer Staples	-4.44%	0.22%	-6.47%	-5.28%	-7.91%
Conglomerates	4.72%	-0.78%	-16.29%	-9.25%	-17.47%
Oils and Energy	-4.76%	11.15%	-40.57%	-9.51%	-45.26%
Transportation	2.98%	4.63%	-19.93%	-10.61%	-21.46%
Industrial Products	-1.46%	0.39%	-19.57%	-12.58%	-22.36%
Construction	-6.65%	3.39%	-27.47%	-21.41%	-31.24%
S&P	2.68%	3.55%	-10.79%	1.75%	-15.00%

Annual Total Net Income Growth
•    Total S&P 500 Net Income in 2009 expected to be 4.6% below 2008 levels
•    Total earnings for the S&P 500 expected to jump 23.5% in 2010, 20.0% further in 2011
•    Total earnings in 2010 to still be 8.9% below 2007 levels
•    Data for 2011 is still thin, so take with a grain of salt
•    Staples, Medical and Business Service only sectors to see positive growth for 2009, although Finance and Autos moving from a loss to a profit. Construction to see much smaller losses in 2009, move to profit in 2010

Annual Total Net Income Growth
EPS Growth	2008	2009	2010	2011
Auto	+ to -	- to +	1782.51%	88.00%
Basic Materials	-12.33%	-62.05%	91.69%	24.49%
Finance	+ to -	- to +	54.99%	50.64%
Oils and Energy	20.42%	-56.41%	44.61%	26.17%
Transportation	3.72%	-32.00%	22.86%	19.92%
Industrial Products	7.48%	-37.08%	21.60%	18.02%
Aerospace	13.31%	-16.76%	19.86%	6.73%
Computer and Tech	9.83%	-4.84%	19.13%	11.45%
Business Service	14.28%	4.46%	14.37%	20.59%
Consumer Staples	-2.55%	1.47%	12.16%	8.46%
Consumer Discretionary	6.92%	-9.06%	11.66%	14.56%
Retail/Wholesale	7.01%	-3.05%	11.63%	13.86%
Utilities	5.83%	-0.77%	9.75%	9.84%
Medical	9.16%	1.96%	9.01%	9.20%
Conglomerates	-10.96%	-33.49%	0.68%	21.36%
Construction	+ to -	- to -	- to +	75.08%
S&P	-22.72%	-4.56%	23.46%	20.00%

Annual Total Revenue Growth
•    Total S&P 500 Revenue in 2009 expected to be 9.6% below 2008 levels
•    Total revenues for the S&P 500 expected to rise 7.1% in 2010
•    Only 4 sectors to post positive revenue growth in 09, all expected to be positive in 2010
•    For 2009, revenues fall more than earnings; for 2010, earnings rise faster than sales — both mean big margin expansion
•    Energy, Autos, Materials and Construction see biggest revenue declines in 2009, but will see double digit increases in 2010

Annual Total Revenue Growth
Sales Growth	2008	2009	2010
Oils and Energy	24.34%	-36.55%	20.75%
Basic Materials	11.50%	-25.26%	12.43%
Utilities	11.81%	-5.53%	11.04%
Construction	-25.81%	-23.23%	10.82%
Medical	7.73%	5.19%	8.32%
Transportation	8.09%	-16.27%	7.01%
Industrial Products	10.76%	-16.45%	6.07%
Computer and Tech	6.60%	-3.48%	5.98%
Retail/Wholesale	6.20%	4.02%	5.38%
Auto	-8.23%	-25.24%	5.21%
Consumer Staples	1.74%	-8.90%	4.84%
Busines Service	9.14%	-9.77%	3.96%
Consumer Discretionary	5.22%	-9.24%	3.69%
Aerospace	2.26%	6.49%	1.90%
Finance	-22.57%	4.89%	1.20%
Conglomerates	6.32%	-14.10%	0.13%
S&P	4.21%	-9.61%	7.06%

Revisions: Earnings

The Zacks Revisions Ratio: 2009
•    Revisions ratio for full S&P 500 down to 2.42, from 3.00 2 weeks ago
•    Positive surprises translating to estimate increases for 2009
•    Five sectors seem more than four estimate increases for each cut
•    Analysts cutting estimates for Aerospace and Construction by more than 2:1
•    Transports and Staples lead, Retail, Medical and Tech also strong
•    Ratio of firms with rising to falling mean estimates falls to 1.89 from 3.82
•    Total number of revisions (4 week total) down to 1,783 from 4,388 last week (-59.4%)
•    Increases down to 1,262 from 3,291 (-61.7%), cuts down to 521 from 1,097 (-52.5%)
•    Total Revisions activity past peak for this earnings season, will fall sharply over next few weeks

The immediate effects of the much-better-than-expected earnings for the third quarter are starting to fade as the estimates roll off the four-week moving totals. However, revisions activity remains quite strongly positive for both this year and next.

The broad increases in earnings estimates seems to reflect a much better short-term outlook for the economy. Note that some of the most cyclical areas such as Transportation, Retailers and Autos are seeing a large preponderance of upward over downward earnings revisions, and that most of the firms in those sectors are seeing their consensus estimates increase.

On the other hand, the defensive Staples and Medical sectors have very high revisions ratio of 8.25 and 4.41, respectively, so it’s not just the cyclicals. Then again, given the great performance by the Staples on the surprise front, a strong estimate revisions performance is not surprising.

The Zacks Revisions Ratio: 2009
Sector	%Ch Curr Fiscal Yr Est – 4 wks	# Firms Up	# Firms Down	# Ests Up	# Ests Down	Revisions Ratio	Firms up/down
Transportation	0.35	9	1	15	1	15.00	9.00
Consumer Staples	0.85	30	7	99	12	8.25	4.29
Retail/Wholesale	2.5	38	7	318	55	5.78	5.43
Medical	0.84	27	9	75	17	4.41	3.00
Computer and Tech	3.38	43	17	293	68	4.31	2.53
Auto	8.46	3	2	11	3	3.67	1.50
Business Service	-0.12	4	2	5	2	2.50	2.00
Consumer Discretionary	0.71	13	9	85	40	2.13	1.44
Conglomerates	3.85	3	5	2	1	2.00	0.60
Basic Materials	-0.67	9	8	21	14	1.50	1.13
Finance	0.15	43	27	130	90	1.44	1.59
Utilities	2.54	18	17	48	39	1.23	1.06
Industrial Products	3.17	10	8	37	32	1.16	1.25
Oils and Energy	-1.05	21	20	108	111	0.97	1.05
Construction	-6.37	4	5	13	31	0.42	0.80
Aerospace	-0.12	4	4	2	5	0.40	1.00
S&P	1.11	279	148	1262	521	2.42	1.89

Revisions: Earnings

The Zacks Revisions Ratio: 2010
•    Revisions ratio for full S&P 500 edges down to 1.77, from 1.98
•    Positive surprises translating to estimate increases for 2010, as well as 2009
•    Eclectic mix of strong sectors, Business Services, Staples lead, followed by Basic Materials
•    Ratio of firms with rising estimate to falling mean estimates at 1.43, up from 2.06 two weeks ago
•    Total number of revisions (4 week total) down to 1.759 from 3,956 (-55.5%)
•    Increases down to 1,124 from 2,630 (-57.3%), cuts down to 635 from 1,326 (-52.1%)

The overall picture for 2010 in terms of revisions is broadly similar to that of 2009. The most notable exception is for the Transports, which were on top for 2009 but at the very bottom for 2010. However in both cases, it is based on very few estimates actually being revised for the sector. The revisions ratios are most useful when they are based on a large number of revisions so take the numbers for the small sectors like Transportation and Business Service with a grain of salt.

Among the larger sectors Staples and Materials were the stars. Among the Staples, the Analysts found Campbell Soup (CPB) to be “mm-mm good,” nobody didn’t like Sara Lee (SLE) and even with a name like Smucker they liked J.M Smucker (SJM). The analysts also liked the smell of International Flavors and Fragrances (IFF).

The Zacks Revisions Ratio: 2010
Sector	%Ch Next Fiscal Yr Est – 4 wks	# Firms Up	# Firms Down	# Ests Up	# Ests Down	Revisions Ratio	Firms up/down
Business Service	-0.26	3	3	8	0	NM	1.00
Consumer Staples	0.81	30	8	85	15	5.67	3.75
Basic Materials	-0.87	14	3	30	7	4.29	4.67
Conglomerates	0.36	7	1	8	2	4.00	7.00
Retail/Wholesale	2.11	35	9	269	76	3.54	3.89
Computer and Tech	1.24	36	21	204	84	2.43	1.71
Auto	5.35	2	2	11	5	2.20	1.00
Consumer Discretionary	-0.39	13	10	70	35	2.00	1.30
Medical	0.59	21	17	84	45	1.87	1.24
Oils and Energy	0.02	23	18	136	118	1.15	1.28
Utilities	-0.67	14	20	53	56	0.95	0.70
Finance	-0.80	30	39	119	131	0.91	0.77
Industrial Products	-0.27	8	7	23	26	0.88	1.14
Construction	1.93	5	4	12	15	0.80	1.25
Aerospace	0.23	5	4	6	9	0.67	1.25
Transportation	-0.13	2	7	6	11	0.55	0.29
S&P	0.38	248	173	1124	635	1.77	1.43

Total Income and Share
•    S&P500 expected to earn $577.6 billion in 2008, $713.1 billion in 2010
•    Excluding Financials, total net income expected to be down 18.9% in 2009
•    Energy Share of total earnings plunges to 10.8% in 2009 from 23.8% in 2008
•    Finance share of total earnings moves from deficit in 2008 to 11.8% in 2009, 14.7% in 2010
•    Medical share of total earnings far exceeds market cap share (index weight)
•    Three sectors, Financial, Energy and Tech to account for 64.6% of all incremental earnings in 2010 over 2009, although they account for just 48.3% of total Market Cap

Total Income and Share
Sector	Total Net Income $ 2008	Total Net Income $ 2009	Total Net Income $ 2010	% Total S&P Earn 2008	% Total S&P Earn 2009	% Total S&P Earn 2010	% Total S&P Mkt Cap
Computer and Tech	$126,132	$120,029	$142,986	20.84%	20.78%	20.05%	22.11%
Finance	($24,742)	$66,769	$103,483	-4.09%	11.56%	14.51%	14.40%
Medical	$87,820	$89,543	$97,612	14.51%	15.50%	13.69%	11.16%
Oils and Energy	$143,448	$62,533	$90,427	23.70%	10.83%	12.68%	11.34%
Consumer Staples	$54,617	$55,420	$62,161	9.03%	9.59%	8.72%	8.63%
Retail/Wholesale	$56,396	$54,673	$61,033	9.32%	9.47%	8.56%	9.08%
Consumer Discretionary	$34,462	$31,342	$34,995	5.69%	5.43%	4.91%	5.17%
Utilities	$30,503	$29,610	$31,753	5.04%	5.13%	4.45%	3.82%
Conglomerates	$32,846	$21,846	$21,995	5.43%	3.78%	3.08%	3.67%
Basic Materials	$21,512	$8,165	$15,651	3.55%	1.41%	2.19%	2.54%
Aerospace	$15,547	$12,941	$15,512	2.57%	2.24%	2.18%	1.76%
Industrial Products	$18,601	$11,704	$14,232	3.07%	2.03%	2.00%	2.29%
Transportation	$13,973	$9,501	$11,673	2.31%	1.64%	1.64%	2.14%
Auto	($6,048)	$223	$4,196	-1.00%	0.04%	0.59%	0.77%
Business Service	$3,197	$3,340	$3,820	0.53%	0.58%	0.54%	0.61%
Construction	($3,097)	($38)	$1,562	-0.51%	-0.01%	0.22%	0.50%
S&P 500	$605,168	$577,601	$713,091	100.00%	100.00%	100.00%	100.00%

P/E Ratios
•    S&P 500 trading at 17.6x 2009 earnings, or an earnings yield of 5.68%
•    Trading at 14.2x 2010, 11.9x 2011 earnings, or earnings yields of 7.04% and 8.40, respectively
•    Earnings Yields attractive relative to 10-year T-Note rate of 3.36%
•    Medical has lowest P/E based on 2009 earnings. Aerospace cheapest on 2010 earnings
•    Materials high 2009 P/E to fall dramatically in 2010

P/E Ratios
P/E	2008	2009	2010	2011
Construction	NM	NM	32.2	18.4
Auto	NM	352	18.7	9.9
Transportation	15.5	22.9	18.6	15.5
Conglomerates	11.3	17.1	16.9	14
Basic Materials	12	31.6	16.5	13.2
Industrial Products	12.5	19.9	16.3	13.8
Business Service	19.4	18.6	16.3	13.5
Computer and Tech	17.8	18.7	15.7	14.1
Retail/Wholesale	16.3	16.8	15.1	13.3
Consumer Discretionary	15.2	16.8	15	13.1
Finance	NM	21.9	14.1	9.4
Consumer Staples	16	15.8	14.1	13
Oils and Energy	8	18.4	12.7	10.1
Utilities	12.7	13.1	12.2	11.4
Medical	12.9	12.6	11.6	10.6
Aerospace	11.5	13.8	11.5	10.8
S&P 500	16.8	17.6	14.2	11.9

Data in this report, unless stated otherwise, is through the close on Friday 12/04/2009.

Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market-beating Zacks Strategic Investor service.

Zacks Investment Research