What's Happening on the Earnings Front?

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 picture emerging from the Q2 earnings season is one of all-around strength, with aggregate total quarterly earnings on track to reach a new all-time record and impressive momentum on the revenue side.
For the 378 S&P 500 members that have reported Q2 results already, total earnings are up +103.8% on +28.2% higher revenues, with 87.3% beating EPS estimates and 86.5% topping revenue estimates.
While the outsized earnings growth pace is mostly due to easy comparisons, primarily in the Finance sector, the performance on the revenue front (growth rate as well as beats percentage) is tracking above what we have been seeing in other recent periods.
For the Tech sector, now have Q2 results from 85.1% of the sector’s market capitalization in the S&P 500 index. Total earnings for these Tech companies are up +66% from the same period last year on +26.3% higher revenues, with 96.2% beating EPS estimates and 94.3% beating revenue estimates.
For the Finance sector, now have Q2 results from 82.6% of the sector’s market capitalization in the S&P 500 index. Total earnings for these Finance companies are up +179.4% from the same period last year on +8.5% higher revenues, with 92.7% beating EPS estimates and 81.7% beating revenue estimates.
Excluding the unusually high Finance sector earnings growth, total Q2 earnings growth for the remainder of the index members that have reported results would be up +88.6% on +31.6% higher revenues.
Looking at Q2 as a whole, combining the actual results for the 378 index members that have reported with estimates for the still-to-come companies, total S&P 500 earnings are expected to be up +89.7% from the same period last year on +23.5% higher revenues, with the growth rate steadily going up as companies report better-than-expected results.
Looking at the calendar-year picture for the S&P 500 index, earnings are projected to climb +41.7% on +12.4% higher revenues in 2021 and increase +9.7% on +6.5% higher revenues in 2022. This would follow a decline of -1.7% in 2020.
The implied ‘EPS’ for the S&P 500 index, calculated using the current 2021 P/E of 23.1X and index close, as of August 3rd, is $191.77, up from $135.38 in 2020. Using the same methodology, the index ‘EPS’ works out to $210.47 for 2022 (P/E of 21.0X). The multiples have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.

We pointed out last week how the market was unimpressed with the strong Microsoft

MSFT

and Apple

AAPL

earnings releases, but liked the Alphabet

GOOGL

report. We have since seen results from Amazon

AMZN

and Facebook

FB

as well, with the market’s reaction more in-line with how it responded to the Microsoft release.

The big 5 Tech companies – Apple, Microsoft, Alphabet, Amazon and Facebook –combined earned +88% more in Q2 on +35.4% higher revenues relative to the same period last year.

The chart below shows this elite group’s Q2 expectations in the context of what it did in the preceding period and what is currently expected in the coming four quarters.