Here are two tables posted by Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, who publishes great S&P 500 data every week, and he is largely under the radar.
In the top half of the post above, Howard breaks down YTD S&P 500 attribution, and then in the upper-right corner what happened in the month of May ’21.
Readers should study the above tables and follow Howard on Twitter. It’s very good—and largely underappreciated—S&P 500 earnings analysis.
S&P 500 earnings
- The “forward 4-qtr estimate” as of Friday, May 28 was $190.94 vs. $190.50 last week and $159.02 as of Dec. 31, 2020. The forward estimate has jumped $30 since Dec. 31. Remember, this is a “forward estimate” so it doesn’t include the COVID-influenced 2020 data. That’s amazing.
- The PE on the forward estimate is 22x.
- The S&P 500 earnings yield on the forward estimate is 4.54% vs. 4.58% the previous week and 4.23% as of 12/31/20. The fact that the S&P 500 earnings yield was higher on Friday than on Dec. 31, 2020, despite the rapid rise in S&P 500 earnings, tells us there is still a degree of “PE compression” occurring in the market today, probably a function of the rise in the 10-year Treasury yield in Q1 ’21.
Here are the updated tables of some of the data tracked for readers:
Data source: IBES by Refinitiv
The upward revisions to the quarterly growth rates for 2021 indicate that the EPS and revenue growth rates continue to get revised higher. That’s always a plus.
Bottom-up and annual S&P 500 dollar estimates
Data source: IBES by Refinitiv
This section is a little different than others in that it tracks the dollar estimates for the S&P 500, both the annual estimates and the quarterly bottom-up estimates for 2021 through 2023.
Note the 2nd quarter, 2021 bottom up estimate for the S&P 500 of $44.27 and compare it to Q1 2021’s estimate of $49, with most of the S&P 500 having already reported.
It’s just an opinion but Q2 ’21 will likely wind up being over $50 when the quarter is pretty much complete by mid-August ’21.
The sell-side consensus has been so far off in terms of estimates for the S&P 500 components it’s been remarkable, and yet you really can’t blame then since COVID was a global event and the economic deceleration in March – May ’20 was faster even than the 1930’s Great Depression decline.
But still, you’d think by the end of 2020, that analysts would start building a little upside into their models given Fed liquidity and the rapid improvement in economic data.
Let’s watch that Q2 ’21 bottom-up estimate every week. Again, my guess is it will be well over $50 when Q2 ’20 concludes.
Summary/conclusion
Readers can see the trends are largely unchanged in terms of “growth rates” and my suspicion is that Q2 ’20 will likely see peak “year-over-year” growth rates. Then the percentages will start to normalize as we move through the back half of 2021.
In June, Micron Technology (NASDAQ:MU), Accenture (NYSE:ACN), FedEx (NYSE:FDX), Nike (NYSE:NKE), and many retailers will continue to report their May ’21 financial results.
It’s only in 2022 that growth rates will really “normalize” from the COVID-19 shock, and looking at preliminary estimate trends for 2022, the data in terms of EPS growth still looks average to above-average—but this will be the subject of a separate post.
Treasury yields and corporate credit spreads had a good week last week. I don’t think anyone was buying the “early taper” comments.
Remember, in the capital markets things can change quickly. Take all of this commentary with a grain of salt and anything you read online should be read with substantial skepticism. Invest based on your own financial profile and your tolerance for market volatility and most people don’t know their own tolerance for volatility until they see a bear market up-close and personal.