October 28, 2021

S&P 500 21Q3 Earnings:  Checking on Growth at the Halfway Point

by Thomas Alonso.

At the halfway point in 2021Q3 earnings, with 244 S&P 500 companies having reported, 82% of companies have beat on EPS with an average surprise of 12.2% and YoY growth is running at 38.6% (See Exhibit 1). For revenues, 77% have beat, with an average surprise of 2.1%, and YoY growth of 14.9%. This compares with the midway point last quarter: 91% of companies beat EPS with an average EPS surprise factor of 17.8%, and YoY growth of 87.2% (See Exhibit 2).

Exhibit 1: 2021Q3 Earnings Scorecard as of 10/28/2021

Source: I/B/E/S data from Refinitiv

Exhibit 2: Earnings Scorecard from 7/29/21

Source: I/B/E/S data from Refinitiv

Headed into Q3, results expectations for the energy sector were high as we noted in our preview (here). Using the EARN app in Eikon in Exhibit 3 below, we can check to see how the sector has performed. While it’s still relatively early, with only 6 of 21 companies having reported, results are mixed, with an even split between beats, misses, and matches. That said, YoY growth for the energy sector is still well ahead of the rest of the market, with a reported actual growth rate of 1905.2% and upward revisions to next quarter’s results. Despite the solid results for the sector to date, stock performance has not followed, with the average 2-day price reaction to beats -2.2% and a -6.8% for those that missed.

Exhibit 3: Eikon EARN App Earnings Analysis

Source: Refinitiv Eikon Workspace

We can also use the EARN App to see how the other sectors have fared to date. Despite the best current quarter EPS surprise rate (22%), the consumer discretionary sector has seen downward revisions to next quarter’s estimates, both for companies that reported as well as those that have yet to report (See Exhibit 4).

Exhibit 4: Eikon EARN App Earnings Analysis

Source: Refinitiv Eikon Workspace

The financials sector has also seen strong results, with a 19.2% EPS surprise for the 81% of the sector that has reported (See Exhibit 5) and an 87% beat rate for those that have reported.

Exhibit 5: Eikon EARN App Earnings Analysis

Source: Refinitiv Eikon Workspace

While earnings results have been strong, the YoY growth rate relative to the beginning of the earnings period has proven to be a bit weaker relative to last quarter. At the midway point in Q2 (255 companies reporting) YoY earnings growth of 87.2% (See Exhibit 2) was running at record pace and had improved 21.8 percentage points since the start of earnings season. So far on Q3, YoY growth is at 38.6%, having increased 9.3 percentage points since the start of earnings season.

Using the EARN app, we can see how 2021 and 2022 EPS estimates have trended. In Exhibit 6, we show YoY growth rates for EPS for sectors and the S&P500 overall, at several time periods. Given the strong results so far in 2021, EPS estimates for most sectors and the S&P500 have trended higher. As of today, 2021 full year earnings for the S&P500 are now expected to be up 46.8% YoY compared to the 24.4% growth rate expected at the end of last year.

Exhibit 6: Eikon EARN App Earnings Analysis

Source: Refinitiv Eikon Workspace

As we noted in our preview, the strong YTD 2021 performance has impacted 2022 EPS growth rates. As we show in Exhibit 7, the bottom-up EPS estimate for 2022 is now $220.76/share which is up 13.1% from the start of the year, but below the 20.4% growth in 2021 estimate over the same period. As such, despite the increase in 2022E EPS, the YoY growth rate has declined to 7.9% from 12.3% at midyear.

Exhibit 7: Bottom-up EPS Estimates

Source: I/B/E/S data from Refinitiv

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