S&P 500 EPS are (is?) expected to grow 44% in calendar 2021 per the current IBES/Refinitiv numbers, up from an expected 26% as of 4/2/21, and all this with a market that was trading at a 21.8x multiple as of Friday, Aug. 27, 2021.
That being said, client portfolios were being positioned defensively with more cash, fixed income and stocks that were long-time laggards with a potential catalyst.
Here’s the core number update for the S&P 500 earnings data:
- The “forward 4-quarter” estimate rose to $206.77 from $206.32 last week and up from $175 as of Apr. 2, ’21;
- The PE on the forward estimate 21.8x which is actually lower than the 22.9x multiple as of Apr. 2 ’21;
- The S&P 500 earnings yield is 4.59% versus last week’s 4.65% and versus the 7% hit in late December, 2018.
- The Q3 ’21 bottom-up estimate is presently $49.21 and could easily exceed $55 by year-end 2021.
Weekly Revisions By Quarter:
Week before last, it was noted that Q3 and Q4 ’21 revenue revisions were positive, but unfortunately the table or the key data referenced was buried in the article: the data being referenced here (Q2 and Q3 ’21 revenue revisions) are in the bordered or highlighted area in this table just above.
Note how “expected” Q3 ’21 revenue growth for the S&P 500 has doubled since January ’21.
Third quarter S&P 500 earnings start in about 6 weeks. The revision trends are still favorable and judging by Fed Chair Jerome Powell’s comments about the job market, the 4th quarter of 2021 could be very strong.
Forward EPS Curve
This table is busier than it needs to be: readers only need to watch the “Q3 ’21 to Q2 ’22” EPS estimate and higher. The lines below contain past quarters and much of that is history.
This is all IBES data by Refinitiv repackaged for regular updating by me.
Because the next five weeks will see lower and lower overall revisions by the sell-side this “rate-of-change” data will jump around until Q3 ’21 earnings start in October.
Summary/conclusion
The near-term EPS and revenue revisions for Q3 and Q4 ’21 still look positive. 2022 estimated growth rates are starting to shape up as well, and as of Friday, Aug. 27, as a much lower year in terms of yoy growth for S&P 500 EPS and revenue, but that’s to be expected. Year-over-year growth rates will slow in the coming quarters but the absolute earnings for the S&P 500 should continue to grow.
At the end of last week, as it stands, and for those who like to use 2019 comparisons, the S&P 500 bottom-up quarterly estimates are all above the 2019 comparables:
- Q4 ’21 vs Q4 ’19: $51.32 vs $41.98 – estimate
- Q3 ’21 vs Q3 ’19: $49.21 vs $42.14 – estimate
- Q2 ’21 vs Q2 ’19: $52.71 vs $41.31 – estimate
- Q1 ’21 vs Q1 ’19: $49.13 vs $39.15 – actual
My own guess is that the Q3 and Q4 ’21 bottom-up actuals for the S&P 500 will be well above current levels.
The one consistent theme since last March ’20 is that the sell-side has spectacularly under-estimated the strength in S&P 500 the last 4–5 quarters.
Bottom line is that S&P 500 EPS and revenue revision patterns haven’t yet changed. Saying that, we have to assume at some point volatility and uncertainty will reign supreme.
The one consistent aspect to capital markets over time is that everything changes. Forward estimates can change quickly.
Take all of this with substantial skepticism, and invest according to your own financial condition and appetite for volatility. Predictions and opinions are easy, while being right about the future is far more difficult.