SP 500 Earnings Weekly Update: Averaging Expected Growth Rates for 2020 and 2021

One thing that’s been tracked for a while, but might be somewhat useful in this type of market environment where everyone is looking for some “pandemic allegory” is just averaging expected 2020 and 2021 full-year SP 500 growth rates.

Here is what the progression looks like:

  • 4/24/20: +4% average expected growth rate of SP 500 earnings for years 2020 and 2021
  • 4/17/20: +5%
  • 4/10/20: +5%
  • 4/3/20: +6%
  • 3/31/20: +8%
  • 3/27/20: +7%
  • 3/20/20: +8%
  • 3/13/20: +9% 
  • 3/6/20: +9%
  • 2/29/20: +10%
  • 2/21/20: +10%
  • 2/14/20: +10% 

Source: actual EPS estimate data courtesy of IBES by Refinitiv

The trend is not great. Can’t say I’m encouraged by this.

Tracking “rate of change”: 

 

click to open / enlarge

 

This week’s sequential rate of decline in the bottom-up 2020 SP 500 estimate was the lowest rate of change since early April, which is a small, positive sign.

However I wanted to show readers 2020 and 2021 SP 500 estimates and the rates of change, since I dont think it would good for the SP 500 if 2021’s SP 500 dollar estimate fell below the 2019 “actual” SP 500 EPS of $162.93.

Looking at SP 500 EPS dollar estimates:

Here are the current estimates:

  • 2022 – $190.85
  • 2021 – $170.04 (est) – currently expecting +26% growth next calendar year
  • 2020 – $134.92 (est) – currently expecting a decline in 2020 of 17% y/y
  • 2019  – $162.93 (actual) 1 % y/y growth

Summary / conclusion: Navel gazing this earnings data from IBES by Refinitiv can drive you nuts, but during this correction, the question remains given the uncertainty of it all from a vaccine perspective, an economic perspective and an earnings perspective, is when do the forward revisions start to slow at a decelerating rate (or, in other words stabilize), and how much more stress does the SP 500 estimate have to endure ?

I would not want to see the 2021 SP 500 estimate -currently estimated at $170.04 – to fall below 2019’s actual EPS of $162.93.

Reviewing prior bear markets, the year 2000 peak SP 500 actual EPS print of $55.12 wasn’t exceeded until 2003’s $55.44 and only by a very thin margin.

2006’s peak SP 500 actual EPS print of $88.18, wasn’t exceeded until 2011’s $97.82. (2010 was close at $85.12 but fell a little short.)

The 2021 estimate, which will be affected by the November ’20 Presidential election, will hopefully remain above 2019’s actual EPS of $162 per share.

This is all very fluid – take all commentary and “expectation” with substantial skepticism, since it could change daily. The estimates will change daily too.

Rates of change are very important – decelerating declines are very good news. Let’s give the Tech sector and the “Big 5” a chance to report earnings next week.

Thank for reading.

 

2 Responses to “SP 500 Earnings Weekly Update: Averaging Expected Growth Rates for 2020 and 2021”

  1. Bruce Robinson

    No problem with the banner on this report either, so I think last week’s problem was related to the long sentences used in the middle of the article. Those sentences extended completely across the screen, under the banner, and continuing to the right of the page. Maybe a unique problem for the website that day. Really enjoy your work !

    Reply
    • Brian Gilmartin

      Thanks Bruce. Another issue that seems to trigger the snafu is when i copy and paste anything from DataTrekResearch blog.

      Reply

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