EC Earnings Start Growing Again

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Earnings were hit hard by the Covid-19 pandemic, with each of the first three quarters of 2020 below the comparable quarters in 2019. The year-over-change was particularly dire in the June quarter when earnings for the S&P 500 index declined by more than -32%.

The growth picture improved notably in 2020 Q3 when earnings declined by -7% and the expectation was that the last quarter of the year would show a comparable decline rate. So, it’s a pleasant surprise that 2020 Q4 is on track to show a +3% earnings growth when the pre-season expectation was for an -11% decline.

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.

The Q4 earnings season, which is now entering its final few weeks with less than 17% of S&P 500 companies still to report results, has been a very good one. Not only have an above-average proportion of companies beaten consensus estimates, but guidance has been positive as well. And it is this favorable guidance that has been helping push estimates for the current and coming quarters higher, as we will show a little later in this note.

Earnings Season Scorecard  (as of Friday, February 19th)

We now have Q4 results from 419 S&P 500 members or 83.8% of the index’s total membership. This week brings in results from more than 700 companies in total, including 62 S&P 500 members. We will start seeing more results from the traditional brick-and-mortar retail space this week, including Macy’s (M - Free Report), Home Depot (HD - Free Report), and others. Other notable companies on deck to report results this week include Nvidia (NVDA - Free Report), Salesforce (CRM - Free Report), Airbnb (ABNB - Free Report), Beyond Meat (BYND - Free Report), DoorDash (DASH - Free Report) and others.

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Erikas Ivan 3 days ago Member's comment

Good analysis! Excited about Auto and Tech, where I want to move my money soon!

William K. 5 days ago Member's comment

The prediction of recovery being based on things going the way that I think they will is that growth will continue to increase, unless things do not go the way that I am guessing that they will go.

Dividend Power 5 days ago Contributor's comment

Good article.