For Immediate Release
Chicago, IL – May 5, 2021 – Zacks Director of Research Sheraz Mian says, “Total earnings for the 343 S&P 500 companies that have reported Q1 results are up +49.2% on +10.6% higher revenues, with 87.5% beating EPS estimates and 78.1% beating revenue estimates.”
A Positive Earnings Backdrop
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 Q1 earnings season is one of all-around strength and momentum, even though big slices of the economy are still dealing with the pandemic’s effects.
- Earnings and revenue growth for the 69% of S&P 500 members that have reported Q1 results (343 index members) are tracking above this group’s recent trend, including the pre-pandemic period. But even more importantly, the tone and substance of guidance is favorable, which is helping sustain the favorable revisions trend that has been in place since last Summer.
- Total earnings for the 343 S&P 500 companies that have reported Q1 results are up +49.2% on +10.6% higher revenues, with 87.5% beating EPS estimates and 78.1% beating revenue estimates. The outsized earnings growth is largely due to very strong numbers from the Finance sector.
- For the 92.0% of the Finance sector’s market capitalization that have reported Q1 results, total earnings and revenues are up +112.0% and +8.2%, respectively, with 90.9% beating EPS estimates and 75.3% beating top-line estimates. A combination of easy comparisons and unusually strong capital markets business drove the group’s strong results.
- Excluding the Finance sector’s strong growth, Q1 earnings growth for the remainder of the companies that have reported results would be up +34.8% (vs. +49.2%) on +10.6% (vs. +11.1%) higher revenues, which is still the strongest growth for this cohort of companies in recent quarters.
- For the Technology sector, we now have Q1 results from 79.5% of the sector’s total market capitalization in the S&P 500 index. Total earnings for these Tech companies are up +56.7% from the same period last year on +23.3% higher revenues, with 95.3% of the companies beating EPS estimates and 93.0% beating revenue estimates.
- Looking at 2021 Q1 as a whole, combining the results that have come out with estimates for the still-to-come companies (the ‘blended’ view), total S&P 500 earnings are now expected to be up +44.1% from the same period last year on +9.1% higher revenues, with a combination of easy comparisons and strong gains in a number of sectors giving us the growth rebound.
- The ‘blended’ Q1 total earnings are on track to reach a new all-time quarterly record, thanks to impressive results from Finance and Technology, the two largest earnings contributors to the S&P 500 index.
- Estimates for the current and coming quarters are steadily going 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.
- For the June quarter, S&P 500 earnings are currently expected to be up +57.6% on +16.1% higher revenues, as the year-earlier period represented the bottom of the Covid hit to earnings. The +57.6% earnings growth rate is up from +50.6% at the end of March and +41.6% at the start of January 2021.
- The sectors with positive earnings growth in Q1 include: Finance (+95.9% earnings growth), Technology (+50.4%), Autos (+459.9%), Retail (+66.1%), Medical (+23.6%), Basic Materials (+79.6%), Construction (+55.7%), Industrial Products (+44.2%), Utilities (+8.0%), and Consumer Staples (+11.3%).
- Currently, the only two sectors expected to see their earnings decline are Transportation (-156.3% earnings decline) and Consumer Discretionary (-19.1%).
- Looking at the calendar-year picture for the S&P 500 index, earnings are projected to climb +31.5% on +9.2% higher revenues in 2021 and increase +12.3% on +6.5% higher revenues in 2022. This would follow a decline of -13.1% in 2020 on -1.7% lower revenues.
- The implied ‘EPS’ for the S&P 500 index, calculated using the current 2021 P/E of 23.5X and index close, as of May 3rd, is $178.61, up from $135.82 in 2020. Using the same methodology, the index ‘EPS’ works out to $200.61 for 2022 (P/E of 20.9X). The multiples have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.
- For the small-cap S&P 600 index, we now have Q1 results from 297 index members or 49.4% of the index’s membership. Total earnings for these 297 index members are up +144.8% on +8.2% higher revenues, with 81.1% beating EPS estimates and 77.4% beating revenue estimates.
The Q1 earnings performance of the ‘Big 5’ Tech players – Apple
AAPL
, Microsoft
MSFT
, Alphabet
GOOGL
, Amazon
AMZN
and Facebook
FB
– was nothing less than spectacular. But you wouldn’t know that by looking at how these stocks performed following the quarterly releases.
In fairness, the market ‘liked’ Alphabet and Facebook reports enough to push those stocks higher. But it practically shrugged off the blockbuster Amazon numbers and appeared to be disappointed with the Microsoft and Apple reports.
With respect to Microsoft, the company not only beat top-and bottom-line estimates, but came out with earnings and revenue growth of +38% and +19.1%, respectively. Just to give you a sense of the magnitude of Microsoft’s earnings power, the company earned $14.8 billion in earnings on $41.7 billion in revenues.
Apple’s numbers were no less impressive; it handily beat EPS and revenue estimates, with Q1 earnings and revenues up +110.1% and +53.6%, respectively. In dollar terms, Apple’s Q1 earnings and revenues were up +12.4 billion and $31.3 billion from the year-earlier periods, respectively.
The five ‘Big Tech’ players as a whole – Apple, Microsoft, Alphabet, Amazon and Facebook – earned $74 billion in earnings in the March quarter on $311.6 billion in revenues. This group’s Q1 earnings and revenues are up +104% and +29% from the year-earlier period, respectively.
If one were to look for ‘negatives’ in the above picture, it would probably be the coming periods of deceleration trend in the group. But given the very positive revisions trend currently in place, I would hazard that estimates for the coming periods will most likely get revised higher.
These are growth rates typically associated with start-ups and much younger companies, not seasoned operators like Microsoft and Co.
The Earnings Big Picture
Looking at Q1 as a whole for the S&P 500 index, combining the actual results that have come out with estimates for the still-to-come companies, total earnings and revenues are now expected to be up +44.1% and +9.1%, respectively.
Please note that excluding the Finance sector’s hefty contribution, Q1 earnings growth for the remainder of the index would be +32.8%.
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.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>
Follow us on Twitter:
Tweets by ZacksResearch
Join us on Facebook:
https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks “Terms and Conditions of Service” disclaimer.
www.zacks.com/disclaimer
.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit
https://www.zacks.com/performance
for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report