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S&P 500 Weekly Earnings Update: Revisions Continued Higher

By Brian GilmartinStock MarketsMar 07, 2021 12:18AM ET
www.investing.com/analysis/sp-500-weekly-earnings-update-revisions-continued-higher-200565481
S&P 500 Weekly Earnings Update: Revisions Continued Higher
By Brian Gilmartin   |  Mar 07, 2021 12:18AM ET
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The “quiet period” for earnings activity, both in terms of releases and upward/downward revisions, usually lasts from the last two weeks of each quarter, roughly Mar. 15 to the first two weeks of the new quarter, which in this case is roughly Apr. 14–15, 2021.

Oracle (NYSE:ORCL) is the big Tech report next week. The stock has run nicely after the Barron’s article detailing their continued progress in cloud. AWS (NASDAQ:AMZN), Azure (NASDAQ:MSFT) and Google Cloud (NASDAQ:GOOGL) already have a decent head-start. That doesn’t mean you want to bet against Larry Ellison and Safra Katz, but Oracle is looking up in terms of cloud market share and trailing the pack already, which is a situation unfamiliar to Oracle over the last 40 years. That being said, Oracle’s installed base means they are not starting from scratch.

Expected ’21 S&P 500 EPS and revenue growth rates:

Expected ’21 S&P 500 EPS And Revenue Growth Rates
Expected ’21 S&P 500 EPS And Revenue Growth Rates

Like the last 12 weeks, and even longer, the upward revisions to forward quarter growth rates should portend favorable for “the Market” in 2021, but rising rates are definitely spooking investors, and compressing valuations on the mega-cap growth stocks.

However, this table is still a positive for forward earnings and revenue growth for the S&P 500.

The forward earnings curve:

The Forward Earnings Curve
The Forward Earnings Curve

In this section of our analysis of Refinitiv's I/B/E/S earnings data, we watch the rate of change of the S&P 500 forward earnings curve.

The quiet period really starts Mar. 15 or so, but the numbers are softening a little already. Part of this is due to the fact there are simply fewer companies reporting over the next 4 weeks.

Here’s a snapshot of the period from Dec. 11 through the start of Q4 ’20 earnings in January ’21.

Q4 ’20 Earnings In January ’21
Q4 ’20 Earnings In January ’21

Source: internal spreadsheet from I/B/E/S by Refinitiv data

Note how the 4-week rate of change slows starting mid-December ’20 and then reaccelerates after the start of Q4 ’20 earnings in mid-January.

Just the absence of earnings releases and what is probably the lack of a need for sell-side analysts to update their models results in a slow drift downward in earnings revisions and numbers.

Doing this data every week since early 2000s, it seems to me that the sell-side estimates always err to the conservative or cautious side and particularly after the 33% Covid-19 correction last February – March ’20.

Analysts would rather seem to miss a big upside EPS number and watch a stock move substantially higher, than be too optimistic and miss a big EPS/revenue downside surprise.

S&P 500 EPS key metric update

  • The forward 4-qtr estimate this week was $174.59 versus $174.19 from last week and $159.02 from 12.31.20.
  • The PE ratio remains at 22x the forward estimate
  • The S&P 500 earnings yield is 4.54% versus 4.57% last week and 4.23% on 12.31.20.
  • The “average” expected EPS growth for 2020 and 2021 is still 5%.
  • The calendar 2021 S&P 500 EPS estimate continues to move higher every week, to $174.44 this week, from $174.11 last week, and $167.25 on 12.31.20

Summary

Little has changed about either the trends or the revisions in forward S&P 500 earnings. Do your own homework and invest only based on your financial and emotional profile.

Take everything you read with skepticism and know that investors have various time horizons and risk appetites.

Interest rates are having a big influence on this market so far in 2021, but a correction was long-needed anyway.

S&P 500 Weekly Earnings Update: Revisions Continued Higher
 

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S&P 500 Weekly Earnings Update: Revisions Continued Higher

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