EC Previewing Big Tech Earnings

The first set of comparison charts compare the earnings and revenue growth rates for these 123 index members.

The growth comparison is likely not fair, given the unusually high year-over-year growth rates in the Finance sector, a function of big reserve releases and easy comparisons in 2021 Q1.

The Finance sector is such a big factor in the earnings growth rate for the 123 index members that have reported at this stage. On an ex-Finance basis, the Q1 earnings growth for the remaining companies that have reported results drops to only +6%.

But even on an ex-Finance basis, the Q1 earnings growth rate still compares favorably to other recent periods, as the chart below shows.

The second set of charts compare the proportion of these 123 index members beating EPS and revenue estimates.

Overall Expectations for 2021 Q1

Looking at Q1 as a whole, combining the actual results that have come out with estimates for the still to come companies, total earnings for the S&P 500 index are expected to up +30.2% on +6.6% higher revenues.

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), except for the Finance sector.

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, Construction, Medical, Basic Materials, Consumer Staples, and Utilities.

The table below shows summary expectations for 2021 Q1, contrasted with what was actually achieved in 2020 Q4.

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