S&P 500 21Q1 Earnings Preview: Expectations Continue To Rise

Exhibit 3: Banks’ Positive Surprise

Goldman Sachs has the largest Predicted Surprise (PS) of 16.2% followed by Citigroup at 11.9%. The PS compares the StarMine SmartEstimate to the consensus mean. By overweighting analysts who are more accurate and timelier, the SmartEstimate provides a refined view into consensus. Comparing the SmartEstimate to the mean estimate leads to our PS, which accurately predicts the direction of earnings surprise 70% of the time.

In addition to a positive PS, the banks in Exhibit 3 also have a very high ARM Region Rank score. ARM stands for the Analyst Revision Model, which looks at analyst estimate revisions across Revenue, EBITDA, and EPS over the current quarter, current year, and upcoming year, while also incorporating changes in recommendations. A high model score indicates positive analyst sentiment while also being indicative of future analyst revisions.

New faces in Casino & Gaming

Four new constituents were added to the S&P 500 effective March 22. These include NXP Semiconductors NV (NXPI.OQ), Generac Holdings (GNRC.N), and casino-based Caesars Entertainment Inc. (CZR.OQ), and Penn National Gaming Inc (PENN.OQ).

Penn National and Caesars Entertainment have seen share prices rise remarkably by 960% and 661% respectively over the last year. Both companies make their first appearance in the index and join MGM Resorts International (MGM.N), Wynn Resorts Ltd. (WYNN.OQ), and Las Vegas Sands Corp. (LVS.N) in the S&P 500 Casinos & Gaming sub-industry.

The Casinos & Gaming sub-industry is expected to post 21Q1 earnings growth of only 0.2%, which is weighed down by MGM’s expected earnings growth of -151.4%. However, new entrant Penn National Gaming is expected to post the largest earnings growth in the sub-industry of 105.1%. Penn National is also currently expected to post the largest earnings growth in 21Q2 at 121.7%.

On a full-year basis, 2021 earnings growth for the sub-industry is expected to grow 77.3%, while revenues are expected to grow 88.3%.

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