Looking Ahead To A Coronavirus-Damaged Q2 Earnings Season

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As strong as next year’s growth estimate is, total index earnings would still haven’t gotten back to pre-COVID levels. In other words, S&P 500 earnings in 20201 are currently expected to be modestly below the 2019 level, as the chart below shows.

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These numbers translate to an index ‘EPS’ of $156.12 in 2021 vs. $123.47 in 2020 and $161.26 in 2019.

Q1 Earnings Season Scorecard

As of Friday, May 22, we have seen Q1 results from 479 S&P 500 members or 95.8% of the index’s total membership. Total earnings or aggregate net income for these 479 index members are down -12.7% from the same period last year on +1.3% higher revenues, with 66.4% beating EPS and 58% beating revenue estimates.

We have another 13 S&P 500 members on deck to report results this week. This week’s docket includes results from Costco (COST - Free Report) , AutoZone (AZO - Free Report) , Salesforce (CRM - Free Report) , Dollar General (DG - Free Report) and others. Please note that the Costco and AutoZone reports will be for those companies’ fiscal quarters ending in May, which we count as part of our June-quarter tally.

In other words, the Q2 earnings cycle will get underway this week even though we haven’t closed the books on the Q1 reporting season yet.

As we have been pointing out all along, Q1 results show the opposing effects that the two largest sectors in the S&P 500 index are having on the aggregate growth picture. These two largest sectors are Finance and Technology, with Finance dragging it down and Technology pushing it higher.

Had it not been for the Finance sector drag, Q1 earnings growth would have been a lot better, thanks primarily to the Technology sector results.

  •  Excluding the Finance sector, whose Q1 earnings are down -33.1% on +2.4% higher revenues, earnings for the rest of S&P 500 companies would be down only -6.4% (vs. down -12.7% with Finance).
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