WARNING SIGNS?

Earnings no longer in tandem with stock prices in the EU.

This article by Wolf Richter appeared 6-8-14 on David Stockman's Contra Corner.

Here's a couple of paragraphs from the post.

For years, EPS of the Stoxx companies and the index itself have been rising and falling roughly in parallel. The chart, based on data from FactSet, picks up in 2005. The index was tracking earnings perfectly on the way up. On the way down during the financial crisis, EPS lagged, given that companies report quarterly and the index crashed by the second. Then EPS recovered – OK, in Europe, financial engineering is just as normal as in the US – while the index lagged behind as the debt crisis was raging. But when the index took off, an ugly thing happened:

Since July 2011, earnings have been falling!

And that, despite quarter after quarter of Wall-Street forecasts of dizzying earnings growth for future quarters that then get whittled down to nothing!

As of May 30, according to data provided by FactSet, the Stoxx 600 had EPS of 23.67. That’s down 0.7% from a year ago, and down 11.2% from July 2011. These miraculous European companies that make up this gravity-defying index and that have been trumpeted by Wall Street with such conviction are making less now than they did three years ago during the depth of the Eurozone debt crisis!