FactSet Research Systems Inc.
04/23/2021 | News release | Distributed by Public on 04/23/2021 11:29
S&P 500 Earnings Season Update: April 23, 2021
At this point in time, more S&P 500 companies are beating EPS estimates for the first quarter than average, and beating EPS estimates by a wider margin than average. As a result, the index is reporting higher earnings for the first quarter today relative to the end of last week and relative to the end of the first quarter. The index is now reporting the highest year-over-year growth in earnings since Q3 2010 for Q1. Analysts also expect double-digit earnings growth for the remaining three quarters of 2021. These above-average growth rates are due to a combination of higher earnings for 2021 and an easier comparison to weaker earnings in 2020 due to the negative impact of COVID-19 on numerous industries.
Earnings Continue to Beat Estimates
Overall, 25% of the companies in the S&P 500 have reported actual results for Q1 2021 to date. Of these companies, 84% have reported actual EPS above estimates, which is above the five-year average of 74%. If 84% is the final percentage for the quarter, it will tie the mark (with Q2 2020 and Q3 2020) for the highest percentage of S&P 500 companies reporting a positive EPS surprise since FactSet began tracking this metric in 2008. In aggregate, companies are reporting earnings that are 23.6% above the estimates, which is also above the five-year average of 6.9%. If 23.6% is the final percentage for the quarter, it will mark the largest earnings surprise percentage reported by the index since FactSet began tracking this metric in 2008.
Due to the number and magnitude of these positive EPS surprises, the index is reporting higher earnings for the first quarter today relative to the end of last week and relative to the end of the first quarter. The blended (combines actual results for companies that have reported and estimated results for companies that have yet to report) earnings growth rate for the first quarter is 33.8% today, compared to an earnings growth rate of 30.3% last week and an earnings growth rate of 23.8% at the end of the first quarter (March 31). Positive earnings surprises reported by companies in multiple sectors (led by the Financials, Health Care, Information Technology, and Communication Services sectors) were responsible for the improvement in overall earnings for the index during the past week. Positive earnings surprises reported by companies in the Financials sector have also been the top contributors to the overall increase in earnings for the index since the end of the first quarter.
If 33.8% is the actual growth rate for the quarter, it will mark the highest year-over-year earnings growth reported by the index since Q3 2010 (34.0%). The unusually high growth rate is due to a combination of higher earnings in Q1 2021 and an easier comparison to weaker earnings in Q1 2020 due to the negative impact of COVID-19 on numerous industries. Nine sectors are reporting year-over-year earnings growth, led by the Financials, Consumer Discretionary, and Materials sectors. Two sectors are reporting a year-over-year decline in earnings, led by the Industrials sector.
Revenues Also Coming in Above Estimates
In terms of revenues, 77% of S&P 500 companies have reported actual revenues above estimates, which is above the five-year average of 64%. If 77% is the final percentage for the quarter, it will tie the mark (with Q1 2018) for the third-highest percentage of S&P 500 companies reporting a positive revenue surprise since FactSet began tracking this metric in 2008. In aggregate, companies are reporting revenues that are 2.9% above the estimates, which is above the five-year average of 1.0%. If 2.9% is the final percentage for the quarter, it will mark a tie (with Q4 2020) for the largest revenue surprise percentage reported by the index since FactSet began tracking this metric in 2008.
Due to the number and magnitude of these revenue surprises, the blended revenue growth rate for the first quarter is higher now relative to the end of last week and relative to the end of the first quarter. As of today, the S&P 500 is reporting year-over-year growth in revenues of 7.5%, compared to year-over-year growth in revenues of 7.1% last week and year-over-year growth in revenues of 6.2% at the end of the first quarter (March 31). Positive revenue surprises reported by companies in the multiple sectors (led by the Energy, Communication Services, and Information Technology sectors) were responsible for the increase in overall revenues for the index over the past week. Positive revenue surprises reported by companies in the Financials and Energy sectors have been the largest contributors to the increase in the overall revenues for the index since the end of the first quarter.
If 7.5% is the actual growth rate for the quarter, it will mark the highest year-over-year revenue growth reported by the index since Q3 2018 (8.6%). Eight sectors are reporting year-over-year growth in revenues, led by the Information Technology, Consumer Discretionary, and Communication Services sectors. Three sectors are reporting a year-over-year decline in revenues, led by the Industrials sector.
Looking at future quarters, analysts project double-digit earnings growth for the remaining three quarters of 2021, with earnings growth expected to peak in Q2 2021 at 55.4%
The forward 12-month P/E ratio is 22.3, which is above the five-year average and above the 10-year average.
During the upcoming week, 181 S&P 500 companies (including 10 Dow 30 components) are scheduled to report results for the first quarter.
Listen to Earnings Insight on the go! In our weekly Earnings Insight podcast, John Butters provides an update on S&P 500 corporate earnings and related topics based on his popular Earnings Insight publication. The podcast is made available every Monday-listen on Apple podcasts, Spotify, or factset.com.