For Immediate Release
Chicago, IL – March 25, 2021 – Zacks Director of Research Sheraz Mian says, “Total 2021 Q1 earnings are currently expected to be up +19.5% from the same period last year on +5.4% higher revenues, with a combination of easy comparisons and strong gains in a number of sectors giving us the growth rebound.”
Q1 and 2021 Earnings Estimates Keep Going Up
Note: The following is an excerpt from this week’s
Earnings Trends
report. You can access the full report that contains detailed historical actual and estimates for the current and following periods,
please click here>>>
Here are the key points:
- The overall earnings picture continues to improve, a trend that we strongly feel will accelerate as we move towards the Summer months and signs of a sharp economic rebound emerge.
- Total 2021 Q1 earnings are currently expected to be up +19.5% from the same period last year on +5.4% higher revenues, with a combination of easy comparisons and strong gains in a number of sectors giving us the growth rebound.
- Estimates for the current and coming quarters have steadily gone up, a trend that has been in place since last Summer. We expect this favorable revisions trend to accelerate in the coming months as we start looking past the pandemic.
- The positive revisions trend is broad-based, with Q1 estimates for 10 of the 16 Zacks sectors going up over the last three months and estimates for the Autos and Energy sectors more than doubling over that time period.
- Other sectors experiencing positive estimate revisions include Basic Materials, Construction, Industrial Products, Technology and Finance.
- On the negative side, estimates have come down the most for the Transportation sector, with the Consumer Discretionary and Aerospace sectors also suffering estimate cuts.
- The sectors with positive earnings growth in Q1 include: Finance (+45.2% earnings growth), Technology (+22.0%), Autos (+201.4%), Retail (+39.4%), Medical (+16.4%), Basic Materials (+63.8%), Construction (+36.8%), Industrial Products (+22.5%), Utilities (+4.4%), and Consumer Staples (+2.0%).
- The weakest earnings growth in Q1 is expected to be Transportation (-158.7% earnings decline), Consumer Discretionary (-31.9%), and Energy (-5.1%).
- For the Finance sector, Q1 earnings are expected to be up +45.2% on +1.1% higher revenues, as the group’s year-earlier results were dragged down by big loan-loss reserves at the banks as the pandemic got underway.
- For the Technology sector, Q1 earnings are expected to be up +22.0% from the same period last year on +17.1% higher revenues, a clear case of strong growth and not easy comparisons.
- Looking at the calendar-year picture for the S&P 500 index, earnings are projected to climb +24.3% on +8.3% higher revenues in 2021 and increase +14.8% on +6.4% higher revenues in 2022. This would follow a decline of -13.0% in 2020 on -2.0% lower revenues.
- The implied ‘EPS’ for the S&P 500 index, calculated using current 2021 P/E of 23.1X and index close, as of March 23rd, is $169.29, up from $136.23 in 2020. Using the same methodology, the index ‘EPS’ works out to $194.32 for 2022 (P/E of 20.1X). The multiples have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.
Favorable Revision Trend
Regular readers of our earnings commentary know that the revisions trend lately has been positive. In fact, we flagged the shift in the revisions trend effectively in real time in July 2020, as the economy started coming out of the pandemic-driven lockdowns.
This favorable trend continued with respect to estimates for the first quarter of 2021.
Estimates have gone up the most for the Energy and Autos sectors, with Q1 earnings estimates for these two sectors more than doubling over the last three months. You can see this pronounced positive revisions trend in estimates for Exxon
XOM
, Chevron
CVX
, Ford
F
and others from these two sectors.
Estimates have gone up across the board, with 10 of the 16 Zacks sectors experiencing positive estimate revisions. While the Energy and Auto sectors’ increases have been the biggest in proportional terms, the magnitude of estimate increases are highest for the Technology and Finance sectors, a testament to these sectors’ status as the biggest earnings contributors to the S&P 500 index.
You can clearly see this by looking at recent revisions trends for Apple
AAPL
and JPMorgan
JPM
that provide good representations for their respective sectors.
We expect the favorable revisions trend to gain pace as companies start reporting Q1 results in mid-April and share what they see as trends in underlying economic conditions.
We remain positive in our earnings outlook, as we see the full-year 2021 growth picture steadily improving through the first half of the year as more of the population gets vaccinated.
The flow of recent economic readings about the retail spending, housing starts, and the factory space suggest that activity levels moderated in February, likely reflecting unusual weather and the lingering effects on the pandemic. But with the extraordinary vaccination effort steadily gaining pace and new stimulus checks heading out, it is reasonable to expect the economic growth trend to turn around meaningfully in the coming days.
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