Brian Gilmartin | Apr 11, 2021 12:11AM ET
Last week, IBES data by Refinitiv never published the Q1 – Q4 ’22 bottom up Quarterly S&P 500 EPS estimates, which meant that the “forward 4-quarter” estimate covering Q2 ’21 – Q1 ’22 could only be estimated at $180 “ish” and in fact the estimate was conservative.
This week, IBES published the 2022 Quarterly bottom-up data and the forward 4-quarter estimate jumped to $183.34 vs. last week’s $175.54.
That is an $8 sequential increase in expected S&P 500 EPS, which is similar to the 4th quarter ’20 roll and the $9 jump at the end of the 3rd quarter, 2020.
h2 2021 S&P 500 EPS And Revenue Revisions Still Higher/h2Data source: IBES data by Refinitiv
This table was crafted or devised so readers could easily see the trend in revisions for “expected” forward quarters for 2021.
The table begins at October ’20 last year to give readers 6 full months by week of what revisions look like for forward quarters.
The revisions remain positive. That doesn’t mean the US stock can’t correct, given all the remarkably overbought metrics around bullish sentiment and such, but positive revisions to forward S&P 500 estimates are generally—but not always—a positive for “expected” returns.
h2 S&P 500 EPS And Revenue Data By The Numbers/h2These are estimates that change weekly. Take it all with a grain of salt, but the “forward estimates” are also one of the best single data points incorporating the best forecasts of the sell-side analysts on Wall Street.
h2 Q1 ’21 Expected S&P 500 EPS And Revenue Growth Rates/h2This week (Apr. 12 to Apr. 16) is a big week of reporting for Financial stocks. We will have more on the expected Financial sector earnings releases, but for now here’s a sector overview on the S&P 500:
From fastest to slowest expected Q1 ’21 EPS growth by sector:
The $9.47 current consensus estimate for Q1 ’21 vs $5.01 actual in q1 ’20 is 89% y/y growth, so Amazon (NASDAQ:AMZN) could also be accounting for some of that expected y/y growth for the Consumer Discretionary sector. Tesla (NASDAQ:TSLA) was added to the Consumer Discretionary sector in late December ’20 too.
Looking at the 2 quarters as an “average” is much like looking at a “comp” in retail. The only sectors with lower expected growth in Q1 ’21 than Q1 ’20 is consumer staples and Utilities. The only sectors that showed actual positive y/y EPS growth in Q1 ’20 were Communication Services, Consumer Staples, Health Care, Technology and Utilities.
From fastest to slowest expected Q1 ’21 revenue growth by sector:
S&P 500: +8.8% expected vs -1.3% revenue growth in Q1 ’20.
8.8% revenue growth and 25% EPS growth currently expected for the S&P 500 for Q1 ’21 is pretty healthy growth for the main benchmark, obviously against easier comp’s too for the next 4 quarters of results. meaning the growth rates will get bigger in terms of percentages compared to last year.
Energy’s expected growth in 2021 could already be in the numbers so Q1 ’21 will be the last tough compare for the sector. It’s tougher with percentages too since Energy had a few quarters in 2020 where the sector bled red ink, meaning the EPS growth rate is comparing to a negative number.
However crude has stabilized in the high $50’s, low $60’s already so the key tell will be Q2, Q3 and Q4 ’21 growth rates change for the energy sector after Q1 ’21. Energy companies typically report more towards the end of April, July, etc., or about 2/3rd’s through earnings season.
Here’s what the full-year 2021 expected EPS sector growth rates look like as of Apr. 9, 2021
Source data: IBES by Refinitiv
h2 Summary/Conclusion:/h2The easiest quarterly compares in 2021 will be against the 2nd quarter of 2020 when actual S&P 500 EPS growth fell 30% versus the decline in S&P 500 revenue of -8.7%. The point being that let’s watch and see how Q2 ’21 expected growth rates resolve versus current estimates. It’s hard to believe with a full US economic reopen looming in Q2 ’21 that the current Q2 ’21 EPS growth expectation of +55% on +15.4% revenue won’t materialize, but stranger things have happened.
The sell-side has notoriously underestimated S&P 500 earnings growth for 3 quarters now, so at some point you’d think they would start to get too aggressive to the upside.
Today’s post was more involved and more detailed than I expected. Readers need to remember these estimates and analyst forecasts change CONSTANTLY and even more so during actual earnings releases.
Take everything you read with a grain of salt and evaluate all market-related info in light of your own personal financial situation and risk temperament.
More coming on the Financial sector’s looming earnings reports.
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