EC Handicapping The Q2 2021 Earnings Season

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The following is an excerpt from this week’s Earnings Trends report.

Here are the key points:

  • The market will be looking for the strong earnings momentum we saw in the last reporting cycle to continue in the June-quarter earnings season as well, whose early reports have started coming out already.
  • The expectation is that companies will not only beat seemingly elevated Q2 estimates, but also provide guidance that will help raise estimates for the second half of the year.
  • Total Q2 earnings for the S&P 500 index are expected to be up +59.3% from the same period last year on +17.6% higher revenues, which would follow the +47.6% earnings growth on +8.4% higher revenues in 2021 Q1.
  • A big part of the strong Q2 earnings growth is easy comparisons to the year-earlier period that represented the bottom of the Covid-19 earnings impact. But Q2 estimates also reflect genuine growth, with total index earnings expected to be up +7.8% from the pre-Covid 2019 Q2 period.
  • Total 2021 Q2 earnings for 9 of the 16 Zacks sectors are expected to be up from the pre-Covid 2019 Q2 period, including Technology (up +30%), Basic Materials (+63.8%), Medical (+20.9%), Retail (+23.9%), Construction (+50.1%).
  • Sectors whose 2021 Q2 earnings are expected to remain below the comparable 2019 period include Transportation (down -70.5%), Consumer Discretionary (-52.5%), Autos (-73.3%), and Energy (-17%).
  • Estimates for Q2 and beyond have been steadily going up, with the current +59.3% earnings growth rate up from +50.6% at the end of March and +41.6% at the start of January 2021.
  • Looking at the calendar-year picture for the S&P 500 index, earnings are projected to climb +34.1% on +10.3% higher revenues in 2021 and increase +11.6% 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 23.1X and index close, as of June 1st, is $182.19, up from $135.91 2020. Using the same methodology, the index ‘EPS’ works out to $203.30 for 2022 (P/E of 20.7X). The multiples have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.
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You can access the full report that contains detailed historical actual and estimates for the current and following periods,  more

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William K. 5 days ago Member's comment

Interesting indeed. How was it possible to get earnings estimates from so many CEOs so quickly? At least it looks like a collection of CEO earnings projections.