Another Look at 2022 SP 500 EPS Growth by Quarter and by Sector

It’s still early to draw useful conclusions about potential 2022 winners and losers, so take all this data with a healthy dose of skepticism, but here’s the “expected” quarterly SP 500 EPS and revenue growth – by quarter for 2022:

Source: IBES data by Refinitiv Earnings Scorecard

This table is usually on the weekly update but we should start looking at 2022 separate from 2021 since the market is looking forward anyway.

What’s interesting is that – according to the above table for which some columns are hidden, at this time i.e. November ’20, IBES data and consensus Street estimates was expecting 15% EPS growth for Q1 ’21 and actual growth was +52.8%.

Q1 ’21 is the quarter to watch now, as – regardless of the taper – there is still A LOT of liquidity in the system. Does that mean today’s Q1 ’21 “expected” SP 500 EPS growth of 6.8% could double to 13.6% by June 30th of 2022 ? Sure, it could, but the bigger question is how will the stock market react ?

Investors in 2022 should prepare themselves for lower rates of SP 500 EPS and revenue growth. It’s a “return-to-normal” market.

By Sector:

Investors might be interested in seeing how sector EPS growth rates have changed for 2022 since October 1, 2021.

Energy has actually been revised higher, which is usually bullish for a sector. I know the “seasonals” are weighing on crude oil these last few weeks, but the upward revisions, this early are typically positive for shareholders.

Basic Materials has also been revised higher since October 1.

Financial sector EPS growth is negative since reserve releases are probably expected to be much lower in 2022.

Note the Tech sector and Consumer Disc and Communication Services growth rates. Tesla is the big dog in Consumer Discretionary these days. I checked the EPS and revenue growth rates for Tesla today in terms of EPS and revenue revisions for the rest of ’21 and ’22, and out years. Here’s the results:

Source: IBES data by Refinitiv (sell-side consensus)

The Tesla 2022 EPS estimate has risen 52% since 12/31/20. The 2021 expected Tesla EPs estimate has risen 58% since 12/31/20.

Source: IBES data by Refinitiv (sell-side consensus)

The Tesla revenue revisions look pretty good too.

(This is not a recommendation to buy or sell Tesla. It’s simply one stock – the 2nd largest consumer discretionary component by market cap in the SPY and the ZLY. )

Summary / conclusion: Expected 2022 SP 500 EPS growth rates by sector will be updated again in December ’21 as more earnings get released with more early guidance for 2022.

Really, it’s only the Top 10 stocks that matter for the SP 500 and have mattered for the last few years, although that will undoubtedly change at some point. And of those top 10 stocks, it the Top 5 or 6 that matter the most.

Energy and Basic Materials – the commodity leaders – although the 2 sectors represent only about 6% – 7% of the SP 500’s market cap – are seeing positive revisions and that’s usually a good sign. However give it some more time to play out.

With the tremendous flood of capital into the EV space and the land rush for EV charging stations and batteries and other components tangential to the EV explosion, the long-term demand trend for gasoline has to be lower and that means the long-term demand for crude oil has to be lower as well.

Thanks for reading.




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