One of the vagaries of following the IBES earnings data, is that every April 1st, we get the latest addition to the calendar earnings calendar which in this case is the first look at the 2020 calendar SP 500 estimate.
First, the actual SP 500 EPS print for 2019 as of April was $162.93.
If we look at the quarterly bottom-up actual EPS prints for 2019, here is the quarterly chronology for 2019:
- Q1 ’19: $39.15 – actual
- Q2 ’19: $41.31 – actual
- Q3 ’19: $42.15 – actual
- Q4 ’19: $41.98 – actual
The quarterly results sum to $164.59.
Here is the current forward estimate for the SP 500 EPS (Source: IBES by Refinitiv)
- 2022: $200.22 – estimate
- 2021: $182.20 – estimate
- 2020: $156.88 – estimate (and it could likely be far lower)
The key metric for readers is that already 2020 has fallen below 2019’s “actual EPS” which is no surprise.
Listening to the pundits this week, some are expecting a range of 2020 full-year earnings of $100 – $140 per share.
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Taking a look at 2001 – 2003 recession, here is the actual progression in annual SP 500 EPS during those years:
- 2003: $55.44
- 2002: $47.94
- 2001: $45.16
- 2000: $55.12
For the above 4-year period, SP 500 EPS grew very little, and this was a period of the Tech and dot.com collapse, the Enron and Worldcom bankruptcy, and the start of the 2nd Gulf War.
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Here is a look at the annual SP 500 EPS during the 2008 Recession:
- 2011: $97.82
- 2010: $85.28
- 2009: $60.80
- 2008: $65.47
- 2007: $85.12
- 2006: $88.18
Finally, here is the quarterly “estimated” growth rates for 2020:
- Q4 ’20: +1.7%
- Q3 ’20: -3.8%
- Q2 ’20: -13.3%
- Q1 ’20: -5.5%
2nd quarter, 2020 earnings could decline 50% given some of the dire forecasts out there, so the next two quarters will be a complete crap shoot (at this point) since most companies won’t want to give guidance.
Summary / conclusion: Readers might laugh at the “2022” reference in the title, but these out years matter in terms of the stock market and the SP 500. I think the SP 500 is trying to figure out what the 2020 Presidential election will yield America and what that will mean for the first half of 2021. We could see the 2021 EPS estimate for the SP 500 decline to $162 – $164 (which is the actual 2019 number).
Some readers think that 2020 SP 500 earnings will be completely wiped out, but that is highly unlikely. Even in the depths of 2008 and 2009, there is a core business heartbeat that cannot be arrested, and the fiscal stimulus is designed to – at the very least – keep employees tethered to companies for the next 90 days.
The only company of note scheduled to report next week is Delta Airlines, and then Financials start the week following. Delta’s results will predictable, but the week the Financial’s report will be much more informative in terms of what is happening with the stimulus plan, what the banks are seeing in terms of consumer activity, and it will all be evaluated in light of the Covid-19 data that is being disclosed during that week.
Thanks for reading, and understand that the forward SP 500 EPS estimates for 2020 are as uncertain as at any time since 2008. IBES by Refinitiv publishes this information daily and given the current circumstances it can change quickly.
Just assume 2020 SP 500 will be a disaster and look for sector reasons to become more positive.
And remember too, this too shall pass.