WEEkly MArkEt UpdAtE2
The chart below plots our measures o perormance or the S&P 500 Indexcompanies rom the second quarter o 1998 to the ourth quarter o last year on atrailing our-quarter (12-month) basis. Each o these measures is based on a com-bined “per share” basis. Sales per share measures the combined reported revenueso the companies. Earnings per share is the net reported prots (ater tax). Free cashfow per share is a measure o the amount o cash the combined companies used(negative number) or generated (positive number) based on their operating activities(making and selling goods and services), investment activities (e.g., building plants,acquiring or selling businesses) and nancing activities (e.g., issuing equity, paying odebt). And EBITDA per share (where the acronym stands or earnings beore interest,taxes, depreciation or amortization) is a proxy or operating prot that can be com-pared among companies with diering capital structures (i.e., capital intensity, amounto leverage) because it measures prot beore the eects o debt (interest expense)or capital depreciation or amortization.The chart illustrates how sales per share and EBITDA per share have still notrecovered (as o the ourth quarter last year) to levels seen just prior to the GreatRecession. That’s understandable given the indebtedness o many households andthe high rates o unemployment which have both crimped consumer spending. Buton the other hand, earnings per share or the combined S&P 500 companies havenearly recovered to pre-recession levels (and will likely do so with the announcemento rst quarter earnings). And ree cash fow per share exceeds its pre-recessionlevels. These our trends refect how corporations have cut back substantially onemployment costs, overhead expense and investing activities in order to generateimpressive earnings and ree cash fow per share growth in an environment wheresales and operating prots (as measured by EBITDA per share) have struggledto recover.
WEEkly MArkEt UpdAtE
Sales per share andEBITDA per share havestill not recovered (as othe ourth quarter last year)to levels seen just prior tothe Great Recession. That’sunderstandable given theindebtedness o manyhouseholds and the highrates o unemploymentwhich have both crimpedconsumer spending. But onthe other hand, earnings pershare or the combinedS&P 500 companies havenearly recovered to pre-recession levels.
Sales per Share (Trailing 4 Quarters)
EBITDA, Earnings and Free Cash Flow Per Share(Trailing 4 Quarters)
On a Per Share Basis, Free Cash Flow Has Recovered Most DramaticallyRelative to Sales, Earnings or EBITDA for the S&P 500 Index
Trailing 4 Quarter Sales, EBITDA, Earnings and Free Cash Flow per Share2nd Quarter 1998 to 4th Quarter 2010
Earnings per ShareFree Cash Flow per ShareEBITDA per ShareSales per Share
Q2 1999Q4 1999Q2 1998Q4 1998Q2 2000Q4 2000Q2 2001Q4 2001Q2 2002Q4 2002Q2 2003Q4 2003Q2 2004Q4 2004Q2 2005Q4 2005Q2 2006Q4 2006Q2 2007Q4 2007Q2 2008Q4 2008Q2 2009Q4 2009Q2 2010Q4 2010