The US corporate earnings season is in full swing and investors are waiting to have a clear vision of the way ahead. The picture that emerges from the first quarter earnings season is one of overall strength and momentum, even as large slices of the economy are still grappling with the effects of the pandemic.
Zacks Investment Research takes a close look at the first quarter earnings of S&P 500 companies. According to Sheraz Mian, Zacks research director, the earnings and revenue growth of the 69% of S&P 500 members who released first quarter results (343 index members) is higher than the recent trend for this group, including the pre-pandemic period. But more importantly, the tone and substance of the guidance is supportive, helping to keep the trend of favorable revisions in place since last summer.
In the “A Positive Earnings Backdrop” report, Zacks Research says: “The big five tech players as a whole – Apple, Microsoft, Alphabet, Amazon and Facebook – made $ 74 billion in revenue in the March quarter. for a turnover of 311.6 billion dollars. This group’s first quarter profit and revenue are up 104% and 29% from the same period a year earlier, respectively. “
For the 92.0 percent of the financial sector’s market capitalization that released results in the first quarter, total profits and income are up +112.0 percent and +8.2 percent, respectively, 90, 9 percent exceeding EPS estimates and 75.3 percent exceeding revenue. estimates. A combination of easy comparisons and exceptionally strong activities in the capital markets contributed to the good results of the group.
Excluding strong growth in the Finance sector, first quarter profit growth for other companies that published results would be up + 34.8% (vs. + 49.2%) on revenues up + 10.6% (vs. + 11.1%), which remains the strongest growth for this cohort of companies in recent quarters.
For the tech sector, we now have first quarter results of 79.5% of the sector’s total market capitalization in the S&P 500 Index. Total profits for these tech companies are up + 56.7% compared to the same period last year with revenues higher by + 23.3%, 95.3% of companies exceeding EPS estimates and 93.0% of revenue estimates.
S&P 500 companies
Total profits for the 343 S&P 500 companies that released first quarter results are up + 49.2% on higher revenues of + 10.6%, with 87.5% beating EPS estimates and 78%. 1% exceeding revenue estimates. The disproportionate profit growth is largely due to the very good figures in the finance industry.
Looking at the whole of the first quarter of 2021, combining the published results with the estimates of upcoming companies (the “mixed” view), the total profits of the S&P 500 are now expected to increase by + 44.1% per year. report at the same level. period last year on revenues up + 9.1 percent, with a combination of easy comparisons and strong gains in a number of sectors giving us the growth rebound.
First quarter “mixed” total earnings are on track to hit a new all-time quarterly record, thanks to impressive results from Finance and Technology, the two largest contributors to S&P 500 earnings. The “EPS” implied for the S&P 500 Index, calculated using the current 2021 P / E of 23.5X and the index close, on May 3, is $ 178.61, up from $ 135.82 in 2020. Using the same methodology, the index “EPS” is equivalent to $ 200.61 for 2022 (P / E of 20.9X). Multiples were calculated based on the index’s total market capitalization and aggregate bottom-up earnings for each year.
Zacks Investment Research expects this favorable revision trend to accelerate in the coming months as global investors begin to look beyond the pandemic.