EC A Very Strong Q1 And 2021 Earnings Picture

We started seeing a positive shift in the overall earnings picture in July last year when estimates started rising again after the sharp Covid-driven cuts.

This improving trend in estimate revisions remained in place over the following months and actually accelerated over the last few months, as the chart below highlighting the evolution of 2021 Q1 earnings growth estimates shows.

As the chart above shows, the expectation is for total S&P 500 earnings to increase +19.8% in Q1 from the same period last year on +5.4% higher revenues. Today’s +19.8% earnings growth rate is up from +19.4% last week.

Part of the strong growth in Q1 is reflective of easy comparisons, as the last month of 2020 Q1 was weighed down by the pandemic, though the full impact showed up in Q2. Those easy comparisons are notable for the Finance, Consumer Discretionary, Transportation, and Energy sectors. Profitability in these sectors is notably above the Covid-hit levels of the year-earlier period, but they are still below the comparable period in 2019 (2019 Q1).

But it isn’t just easy comparisons that is giving us the strong aggregate growth in 2021 Q1. A number of sectors, including the all-important Technology sector, are on track to produce genuine growth, i.e., 2021 Q1 profitability growth above pre-Covid levels. These include, in addition to Technology (+27% above 2019 Q1 level), Construction (+55.1%), Medical (+27.2%), Basic Materials (+12.8%), Consumer Staples (+10.7%) and Utilities (+9.7%).

The Finance sector is benefiting from easy comparisons to the year-earlier period, but 2021 Q1 earnings are expected to be only -1.3% below the 2019 Q1 level.

Earnings Season Never Ends

The Q1 earnings season will really get going when the big banks come out with their March-quarter results on April 14th. But not all companies have fiscal quarters that correspond ‘cleanly’ with the calendar periods.

For example, there are almost two dozen S&P 500 members that have fiscal quarters that ended in February and 12 such companies, including FedEx (FDX - Free Report), Nike (NKE - Free Report), Costco (COST - Free Report) and others have reported their fiscal February-ending quarterly results already.

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William K. 3 weeks ago Member's comment

Here I see a lot of predictions that may be good for wall street and the financial weasels but bad for almost everybody else. And the federal reserve individuals will be happy because they will have provided the inflation that their friends need to keep getting richer. Pardon me for not cheering.