SP 500 Earnings Update: SP 500 Earnings Yield Still Above 5%

Technically, Q4 ’21 earnings releases will last another 3 weeks or so and then Q4 ’21 will be done.

Since company guidance and analyst revisions are a big deal for forward EPS and revenue estimates, here’s the spreadsheet for expected calendar 2022 EPS growth by sector for the SP 500:

The industrial sector is still the sector to lead EPS growth this coming year, although only 29 of the 72 industrial companies have reported their Q4 ’21 financial results as of Friday, January 28, 2022.

In late December ’21 this blog gave you a heads up on the industrial sector growth with this post. What’s somewhat surprising is that given the Boeing (BA) miss, the industrial sector expected EPS has held up as well as it has. Technically, Boeing looks to be in good shape still. BA’s Q4 ’21 was a huge mess. I’m hoping CEO Calhoun is clearing the decks.

The favorite table: 

Source: IBES data by Refinitiv 

Readers might find it interesting that Q4 ’21 expected revenue and EPS growth for the SP 500 is still being revised higher, while the 4 quarters of 2022 are showing higher revisions in terms of expected revenue growth, but SP 500 EPS growth is stable to lower.

SP 500 key metrics:

  • The forward 4-quarter estimate fell a little this week to $223.57 from last week’s $223.66;
  • The PE ratio at weeks end is 19.8x versus last week’s 19.6x
  • The SP 500 earnings yield this week is 5.04% versus last week’s 5.09%. This shouldn’t surprise readers as 2022 would be a perfect year for PE compression given rising rates and the 5-year outperformance of the mega-cap names in the SP 500. We would see the earnings yield rise all year as the PE on the SP 500 shrinks and the indices struggle to sustain rallies.

The three remaining mega-cap tech names report this week include Alphabet (GOOG/GOOGL) on Tuesday, February 1, Metaverse / Facebook (FB) on February 2nd, and then Amazon (AMZN) on Thursday February 3, 2022. Starbucks (SBUX) also reports next week, although it’s a very small position. For the value-oriented, uncorrelated crowd, Merck (MRK) reports Wednesday, February 2nd, after the market close.

This blog will be out with an earnings preview on the above names later this weekend.

Summary / conclusion: Each week, a little internal game is played and I try to determine in advance, which earnings release will have the biggest market impact, and for the SP 500 mega-cap names, you’d have to think it would be Amazon. More is coming this weekend on the above reports, but Amazon has been range-bound now since September 1, ’20 and the overall sentiment around the stock remains very bullish (hmmm).

Expected SP 500 EPS growth for calendar ’22 is still 8% which hasn’t changed in a few months. Expected ’22 revenue growth for the SP 500 is also about 8% averaging the 4 quarters in the second Excel spreadsheet.

2022 might turn out to be all about everything but SP 500 EPS and revenue growth.

Readers and investors are finally seeing a “normal” year of SP 500 EPS and revenue growth, given the current estimates.

Earnings are taking a backseat to monetary policy and international events (for now).

Take everything you read here with substantial skepticism. The markets change every day. Past performance is no guarantee of future results.

Thanks for reading.

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