Changes in Q3 ’21 Expected Revenue Growth Rates for the SP 500 / Top 10 Holdings as of 9/30/21

There are 11 sectors in the SP 500.

Readers need to see how the expected Q3 ’21 sector revenue growth rates have changed since mid-August ’21 or the unofficial end of Q2 ’21 earnings season:

  • Consumer Discretionary: On 10/1, 10.6% y.y revenue growth is expected, versus 10.4% on 8/13/21;
  • Consumer Staples: On 10/1, 8.3% y.y revenue growth is expected, 10.4% on 8/13/21;
  • Energy: on 10/1, 57.8% y.y revenue growth is expected, vs 57.9% on 8/13/21;
  • Financial: on 10/1, -0.8% y.y revenue growth is expected vs -1.7% on 8/13/21;
  • Health Care: on 10/1, 11.1% y.y revenue growth is expected vs 10.7% on 8/13/21;
  • Industrials: on 10/1, 17.8% y.y revenue growth is expected vs 19.2% on 8/13/21;
  • Basic Materials: on 10/1, 28.4% y.y revenue growth expected vs 28.7% on 8/13/21;
  • Real Estate: on 10/1, 13.1% y.y revenue growth expected, vs 12.8% on 8/13/21;
  • Technology: on 10/1, 18.7% y.y revenue growth expected, 18.1% on 8/13/21;
  • Communication Services: on 10/1, 17.3% y.y revenue growth expected, vs 17.5% on 8/13/21;
  • Utilities: on 10/1, 5.2% y.y revenue growth expected, vs 6.7% on 8/13/21;
  • SP 500: on 10/1, 14.1% y/y revenue growth expected, vs 13.9% as of 8/13/21;

Sectors ranked from strongest to weakest expected Q3 ’21 revenue growth:

  • Energy: 57.8%
  • Basic Mat: 28.4%
  • Technology: 18.7%
  • Industrials: 17.8%
  • Comm Services: 17.3%
  • Real Estate: 13.1%
  • Health Care: 11.1%
  • Cons Disc: 10.6%
  • Cons Staples: 10.6%
  • Utilities: 5.2%
  • Financials: -0.8%
  • SP 500: 14.1%

Sectors with the biggest upward revisions since August 13 ’21 for Q3 ’21 revenue:

  • Technology saw a 60 bp’s increase on an expected 18.7% growth rate;
  • Health Care saw a 40 bp increase on an expected 11.1% growth rate;

Sectors with the biggest downward revisions since August ’13 ’21 for Q3 ’21 revenue:

  • Consumer Staples saw a 210 bp decrease since 8/13/21 probably due to the stronger dollar;
  • Industrials saw a 140 bp decrease since 8/13/21;
  • Utilities saw a 150 bo decrease on a mid single digit growth rate;

Commentary: Tesla’s announcement over the weekend of stronger-than-expected Q3 ’21 car deliveries will likely help the Consumer Discretionary sector next week in terms of possible revisions, although Tesla’s earnings weight is much smaller than it’s market cap weight in the SP 500.

The dollar’s influence is bigger than readers might suspect on the SP 500 since 40% – 45% of the entire benchmark’s revenue is non-US.

Top 10 Holdings as of 9/30/21 and YTD returns: 

  • Microsoft: +27.5% YTD
  • BlackRock Strategic Inc: +0.97%
  • JP Morgan Income Fund: +3.80%
  • Amazon: +0.86%
  • Schwab: +38.4%
  • JP Morgan: +31%
  • RSP (eq wt ETF): +18.8%
  • Tesla: +9.9%
  • Oakmark Int’l: +7.97%
  • QQQ: +14.5%

The SP 500 (SPY) returned 15.91% YTD as of 9/30/21.

Summary / conclusion: Q3 ’21 expected revenue growth hasn’t changed much the last 6 weeks, and readers should be able to see that from the analysis at the top of the blog. The commodity sectors like Energy and Basic Materials are leading the expected revenue growth on an absolute basis, although both sectors combined are just 6% – 7% of the SP 500 by market cap weight.

No question my best trade for clients in the last 10 years has been avoiding the Energy sector entirely, with the exception of the bounce off the Q1 ’16 bottom when credit spreads widened dramatically and the price of crude per barrel hit $28 per share. Earnings estimates were rising there for a few quarters but the stocks topped out and the XLE was quickly sold. Tom Lee has been right on the energy sector and I think he remains an unabashed bull, but I suspect there will be a secular decline in demand for gasoline once electric vehicles hit critical mass. Tesla delivered another good quarter of vehicle sales, which was announced this weekend.

It’s a tough call – there are still a lot of energy bulls and the rig count hasn’t really grown much in the last 18 months.

The big question for the 4th quarter and end of year rally is how will the “Big 5” or “Big 6” within the SP 500 perform, which is Apple, Microsoft, Alphabet, Facebook, Amazon, and now Tesla. Tesla traded well during the market volatility of the last 2 – 3 weeks and now we know why.

We’ll see.

This blog will update the trends in the Big 6 EPS and revenue estimates in a few weeks. The companies don’t report until the last week of October.

Take everything you read with great skepticism. Positions and markets can change quickly, None of this should be construed as advice, merely one sample of one style for one advisor.

Thanks for reading.




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