EC Earnings Estimates Keep Going Up

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Earnings growth was expected to resume in the first quarter of 2021 after the pandemic-driven declines of 2020. But positive growth has arrived a little earlier, with earnings in the ongoing Q4 earnings season now modestly above the year-earlier period.

The chart below takes a big-picture view of quarterly earnings and revenue growth for the S&P 500 index that shows actual results for the last four quarters and current consensus estimates for the coming three periods, with 2020 Q4 highlighted in the middle.

To give you a sense of how much the Q4 growth pace has changed in recent weeks and how good the reporting cycle has turned out to be, the consensus estimate for Q4 was for a decline of -11.2% in mid-December 2020.

Earnings Season Scorecard

(as of Friday, February 12)

Three-quarters of the Q4 earnings season is now behind us, at least for the large cap S&P 500 index (372 companies have reported already). Please note that these 372 index members collectively account for 83.6% of the index’s total market capitalization. As such, the results out already represent a true cross-section of the index as a whole and of the overall earnings picture.

The reporting cycle starts decelerating from this week onwards, with more than 350 companies on deck to report Q4 results, including 48 S&P 500 members. We will start seeing from the traditional brick-and-mortar retail space this week, with Walmart (WMT - Free Report) kicking off the reporting cycle for the group. Other notable companies on deck to report results this week include Applied Materials (AMAT - Free Report), Deere & Co. (DE - Free Report), Shopify (SHOP - Free Report), and others.

Total Q4 earnings (or aggregate net income) for these 372 companies are up +4.6% from the same period last year on +2.9% higher revenues, with 80.4% beating EPS estimates and 77.7% beating revenue estimates.

The two sets of comparison charts below put the Q4 results from these 372 index members in a historical context, which should give us a sense how the Q4 earnings season is tracking at this stage relative to other recent periods.

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William K. 2 weeks ago Member's comment

Of course the earnigs estimates are going to keep rising. That is what CEOs are paid to do. And if the earnings do rise to the predicted numbers then a bonus may be delivered, if not, possibly not. The goal is to keep the shareholders happy so they buy more shares, while at the same time having the announcement not be so memorable that it is recalled if the profits do not reach the predicted value.