Earnings Estimates From Q1 Keep Going Up

  • The picture emerging from the Q1 earnings season is one of all-around strength and momentum, even though big slices of the economy are still dealing with the pandemic’s impacts.
  • Earnings and revenue growth for the 91% of S&P 500 members that have reported Q1 results (457 index members) are tracking above this group’s recent trend, including the pre-pandemic period. But even more importantly, the tone and substance of guidance is favorable, which is helping sustain the favorable revisions trend that has been in place since last Summer.
  • Total earnings for the 457 S&P 500 companies that have reported Q1 results are up +46.5% on +9.7% higher revenues, with 86.0% beating EPS estimates and 76.8% beating revenue estimates. The outsized earnings growth is largely due to very strong numbers from the Finance sector.              
  • For the 100% of the Finance sector’s market capitalization that have reported Q1 results, total earnings and revenues are up +98.3% and +7.2%, respectively, with 92.4% beating EPS estimates and 73.9% beating top-line estimates. A combination of easy comparisons and unusually strong capital markets business drove the group’s strong results.
  • Excluding the Finance sector’s strong growth, Q1 earnings growth for the remainder of the companies that have reported results would be up +34.2% (vs. +46.5%) on +10.2% (vs. +9.7%) higher revenues, which is still the strongest growth for this cohort of companies in recent quarters.
  • For the Technology sector, we now have Q1 results from 86.9% of the sector’s total market capitalization in the S&P 500 index. Total earnings for these Tech companies are up +56.0% from the same period last year on +24.8% higher revenues, with 93.4% of the companies beating EPS estimates and 95.1% beating revenue estimates.
  • Looking at 2021 Q1 as a whole, combining the results that have come out with estimates for the still-to-come companies (the ‘blended’ view), total S&P 500 earnings are now expected to be up +46.4% from the same period last year on +9.5% higher revenues; meaning the aggregate growth picture will not change much as the still-to-report companies report results.
  • The ‘blended’ Q1 total earnings are on track to reach a new all-time quarterly record, thanks to impressive results from Finance and Technology, the two largest earnings contributors to the S&P 500 index.
  • Estimates for the current and coming quarters are steadily going up, a trend that has been in place since last Summer. We expect this favorable revisions trend to accelerate in the coming months as we start looking past the pandemic.
  • For the June quarter, S&P 500 earnings are currently expected to be up +58.6% on +16.8% higher revenues, as the year-earlier period represented the bottom of the Covid hit to earnings. The +58.6% earnings growth rate is up from +50.6% at the end of March and +41.6% at the start of January 2021.
  • Sectors with positive earnings growth in Q1 include: Finance (+98.3% earnings growth), Technology (+51.9%), Autos (+608.9%), Retail (+67.5%), Medical (+24.9%), Basic Materials (+80.4%), Construction (+58.0%), Industrial Products (+45.5%), Utilities (+3.8%), and Consumer Staples (+12.3%).
  • Currently, the only two sectors expected to see their earnings decline are Transportation (-156.3% earnings decline) and Consumer Discretionary (-14.2%).
  • Looking at the calendar-year picture for the S&P 500 index, earnings are projected to climb +32.7% on +9.7% higher revenues in 2021 and increase +11.9% on +6.4% higher revenues in 2022. This would follow a decline of -13.1% in 2020 on -1.7% lower revenues.
  • The implied ‘EPS’ for the S&P 500 index, calculated using the current 2021 P/E of 23.0X and index close, as of May 11th, is $180.45, up from $135.97 in 2020. Using the same methodology, the index ‘EPS’ works out to $201.87 for 2022 (P/E of 20.6X). The multiples have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.
  • For the small-cap S&P 600 index, we now have Q1 results from 531 index members or 88.4% of the index’s membership. Total earnings for these 531 index members are up +206.9% on +8.3% higher revenues, with 74.0% beating EPS estimates and 75.0% beating revenue estimates. 
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William K. 4 weeks ago Member's comment

I have mentioned this quite a few times, but probably never in this venue, but "the past is far easier to predict correctly than the future." Certainly knowing the past is a very good way to learn about avoiding the repeat of mistakes again in the future.