SP 500 Earnings Update: Revisions are Still Positive, Which Has Been the Case for a While

SP 500 EPS are (is ?) expected to grow 44% in calendar 2021 per the current IBES / Refinitiv numbers, up from an expected 26% as of 4/2/21, and all this with a market trading at a 21.8x multiple as of Friday, August 27th, 2021.

That being said, client portfolios are being positioned defensively with more cash, fixed income and stocks that are long-time laggards with a potential catalyst.

Here’s the core number update for the SP 500 earnings data:

  • The “forward 4-quarter” estimate rose to $206.77 from $206.32 last week and up from $175 as of April 2, ’21;
  • The PE on the forward estimate 21.8x which is actually lower than the 22.9x multiple as of April 2 ’21;
  • The SP 500 earnings yield is 4.59% versus last week’s 4.65% and versus the 7% hit in late December, 2018.
  • The Q3 ’21 bottom-up estimate is presently $49.21 and could easily exceed $55 by year-end 2021.

Weekly Revisions by Quarter: 

With last week’s blog, it was noted that Q3 and Q4 ’21 revenue revisions were positive, but unfortunately the table or the key data referenced was buried in the article: the data being referenced tonight (Q2 and Q3 ’21 revenue revisions) are in the bordered or highlighted area in this table just above.

Note how “expected” Q3 ’21 revenue growth for the SP 500 has doubled since January ’21.

3rd quarter SP 500 earnings start in about 6 weeks. The revision trends are still favorable and judging by Fed Chair Powell’s comments about the job market, the 4th quarter of 2021 could be very strong.

Forward EPS curve: 

This table is busier than it needs to be: readers only need to watch the “Q3 ’21 to Q2 ’22” EPS estimate and higher. The lines below contain past quarters and much of that is history.

This is all IBES data by Refinitiv repackaged for regular updating by this blog.

Because the next five weeks will see lower and lower overall revisions by the sell-side this “rate-of-change” data will jump around until Q3 ’21 earnings start in October.

Summary / conclusion: The near-term EPS and revenue revisions for Q3 and Q4 ’21 still look positive. 2022 estimated growth rates are starting to shape up as well, and as of right now as a much lower year in terms of y.y growth for SP 500 EPS and revenue, but that’s to be expected. Year-over-year growth rates will slow in the coming quarters but the absolute earnings for the SP 500 should continue to grow.

Today, as it stands, and for those who like to use 2019 comparisons, the SP 500 bottom-up quarterly estimates are all above the 2019 comparables:

  • Q4 ’21 vs Q4 ’19: $51.32 vs $41.98 – estimate
  • Q3 ’21 vs Q3 ’19: $49.21 vs $42.14 – estimate
  • Q2 ’21 vs Q2 ’19: $52.71 vs $41.31 – estimate
  • Q1 ’21 vs Q1 ’19: $49.13 vs $39.15 – actual

My own guess is that the Q3 and Q4 ’21 bottom-up actuals for the SP 500 will be well above current levels.

The one consistent theme since last March ’20 is that the sell-side has spectacularly under-estimated the strength in SP 500 the last 4 – 5 quarters.

Bottom line is that SP 500 EPS and revenue revision patterns haven’t yet changed. Saying that, we have to assume at some point volatility and uncertainty will reign supreme.

The one consistent aspect to capital markets over time is that everything changes. Forward estimates can change quickly.

Take all of this with substantial skepticism, and invest according to your own financial condition and appetite for volatility. Predictions and opinions are easy, while being right about the future is far more difficult.

Thanks for reading.

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