Last year at this time, expectations for full-year 2021 SP 500 EPS growth (by sector) looked like this: (All data sourced from IBES by Refinitiv):
Today, the same expected sector growth rates for 2022 look like this:
The point of all this is that one year ago, the “expected” sector growth rates were half of what reality turned to be since 2021, with another quarter left to report, look like this presently:
The 22% expected SP 500 growth rate (one year ago) for 2021 is now 49.6%.
Does that mean the same doubling of SP 500 EPS will occur in 2022 ? Hardly, but the patterns shown here every week, still look positive.
SP 500 metrics:
- The forward 4-quarter EPS estimate for the SP 500 jumped to $216.90 this week from last week’s $215.87. The estimate on 10.1.21 was $213.17 so readers can see that compares are getting tougher and the rate of forward increase is returning to a more “normal” state.
- The PE ratio this week is 21.3x versus last week’s 21.8x
- The SP 500 earnings yield jumped to 4.69% this week vs last week’s 4.58% and the 10.1.21 value of 4.89%.
- The 4th quarter bottom-up estimate for the SP 500 had it’s biggest increase since the last two weeks of October ’21 to $51.26 but is still below the 10/29 peak of $51.70. Judging by Oracle, Costco, Accenture and FedEx, calendar Q4 ’21 earnings should be fine.
Let’s look at some of the tables:
SP 500 forward EPS curve:
Readers haven’t seen this table for a while but it shows the forward quarters on a rolling basis, and the various rates of change in the forward EPS, which readers can see look to be accelerating again. However given the time of year – the next two quarters will likely be dead in terms of revision activity – lets give it a few more weeks.
Expected EPS and revenue growth by quarter:
My favorite table every week shows no signs of any change in trend.
Summary / conclusion: It was shocking to hear Jay Powell say during the presser on Wednesday of this past week that the US economy’s unemployment rate at the end of 2022, (per the Fed’s analysis, dotplotting, whatever you want to call it), is expected to be 3.2%.
When was the last era when the US economy saw a 3.2% unemployment rate ? According to this website, it was the late ’60’s, but the rate never quite dropped to 3.2%. (As of the November ’21 jobs report, today’s unemployment rate is thought to be 4.2%.)
What’s even more bizarre is that the 10-year Treasury closed at 1.46% on Wednesday, post the Powell presser, falling to 1.40% Friday, December 17th, ’21. So the 10-year Treasury yield actually fell despite the very hawkish Fed statements.
No one’s afraid of the Fed I guess.
In terms of 2022, SP 500 EPS growth will be more “normal” i.e. probably within 10% – 15% typical growth rate the last several years.
The pandemic has distorted everything financial, so to speak.
What’s interesting looking at the expected 2022 sector growth rates in one of the spreadsheets above, is that the sector with the strongest expected 2022 EPS growth rate is Industrials. I will have to do a follow-up post on this.
Take everything you read here (and anywhere else) with great skepticism. Capital markets change quickly.
Thanks for reading.