With about 95% of the S&P 500 constituents having reported 1Q22 earnings, we look at aggregate performance and EPS estimates of the eleven S&P500 sectors during the past earnings season and look ahead to what’s expected next quarter and next year.
Exhibit 1 below, reproduced from our daily/weekly S&P 500 Earnings Scorecard (available here), shows that although the earnings growth rate has slowed, it has remained positive. Since the start of earnings season (April1), the YoY growth rate has improved 4.7 percentage points to 11.1%.
Source: I/B/E/S data from Refinitiv
Looking at the 22Q1 results in a longer context in Exhibit 2 below shows that although growth rates have slowed from pandemic impacted quarters, earnings are expected to remain positive with a pick-up in growth forecast later in 2022.
Exhibit 2: S&P 500 Historical and Estimated YoY Growth Rates
In Exhibit 3 below, we use the Preferred Earnings Analysis template in the EARN app in Refinitiv Workspace to show the aggregate performance of the S&P 500 sectors during the 22Q1 earnings season. Despite a majority of beats, we can see that upside has been difficult to come by with average 2 day price reaction to beats of -0.1%, and misses trading down 6.0% on average (Price Reaction -2d columns – red box below).
Exhibit 3: 2022Q1 Earnings Performance via EARN App
Source: Refinitiv Workspace
Looking ahead we can see that 22Q2 earnings expectations have declined slightly to 5.4% compared to 6.8% at April 1. Not surprisingly, the energy sector has the strongest expected growth rate in 2Q with earnings forecast to be up 196.7%.
Exhibit 4: 22Q2 Estimated Earnings Growth
Source: I/B/E/S data from Refinitiv
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Looking at full year estimates (Exhibit 5), expected results for full-year 2022 and 2023 EPS remain consistent, growing 1.6% and 1.2%, respectively. Further out, 2024 EPS estimates have declined to $271.72 from $276.39.
Exhibit 5: Full Year Bottom Up EPS Estimates
I/B/E/S data from Refinitiv
Despite earnings seemingly holding up, multiples have come in dramatically as 10-year yields have risen. In Exhibit 6 below, we chart the forward and trailing P/E multiple for the S&P 500 against the 10-year yield using Datastream.
Exhibit 6: S&P 500 P/E Multiple vs. 10-Year Yield
- Product Insight: Datastream mnemonics used in the chart above are “@:USSP500/@:USSP500(A12FE)”, “@:USSP500/@:USSP500(A12TE)” and “USTRCN10”
In Exhibit 7 below we show the top 20 earnings contributors for the past three quarters and note some interesting trends. First, the concentration in the top 20 has increased dramatically, with the top 20 accounting for 19.93 percentage points of the 42.6% growth in 3Q21. In 4Q21, the top 20 accounted for 18.2 percentage points of the 32.1% overall growth and in 1Q22, the top 20 are now responsible for 10.8 percentage points of the 11.1% overall growth.
Exhibit 7: Actual Earnings Growth Contribution Since 3Q21
3Q21
4Q21
1Q22
I/B/E/S data from Refinitiv
Second, we can see how rising oil prices and rate increases are impacting the results, with companies from the energy sector occupying eight of the top 20 spots in 1Q22 compared to four in 3Q21. On the flip side, we see no financials in the top 20 for 1Q22 after having four and three of the top spots in the past 2 quarters respectively. (See Exhibit 8 below).
Exhibit 8: GICS Sector Breakdown for Top 20 Earnings Contributors
I/B/E/S data from Refinitiv
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