Zacks Investment Research | Mar 17, 2021 06:29AM ET
Note: The following is an excerpt from this week’s
Here are the key points:
Favorable Revision Trend
Regular readers of our earnings commentary know that the revisions trend lately has been positive. In fact, we flagged the shift in the revisions trend effectively in real time in July 2020, as the economy started coming out of the pandemic-driven lockdowns.
This favorable trend continued with respect to estimates for the first quarter of 2021, as the chart below shows.
Estimates have gone up the most the Energy and Autos sectors, with Q1 earnings estimates for these two sectors more than doubling over the last three months. You can see this pronounced positive revisions trend in estimates for Exxon (XOM), Chevron (CVX), Ford (F) and others from these two sectors.
We expect the favorable revisions trend to gain pace as companies start reporting Q1 results in mid-April and share what they see as trends in underlying conditions.
The chart below provides a big-picture view of earnings on a quarterly basis.
We remain positive in our earnings outlook, as we see the full-year 2021 growth picture steadily improving through the first half of the year as more of the population gets vaccinated.
The chart below shows the overall earnings picture on an annual basis.
The flow of recent economic readings about the retail spending, housing starts, and the factory space suggest that activity levels moderated in February, likely reflecting unusual weather and the lingering effects on the pandemic. But with the extraordinary vaccination effort steadily gaining pace and new stimulus checks heading out, it is reasonable to expect the economic growth trend to turn around meaningfully in the coming days.
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