For Immediate Release
Chicago, IL – February 22, 2021 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Macy's, Inc. (
M Quick Quote M - Free Report) , The Home Depot, Inc. ( HD Quick Quote HD - Free Report) , NVIDIA Corporation ( NVDA Quick Quote NVDA - Free Report) , salesforce.com, inc. ( CRM Quick Quote CRM - Free Report) and The Boeing Company ( BA Quick Quote BA - Free Report) . Earnings Start Growing Again
Earnings were hit hard by the Covid-19 pandemic, with each of the first three quarters of 2020 below the comparable quarters in 2019. The year-over-change was particularly dire in the June quarter when earnings for the S&P 500 index declined by more than -32%.
The growth picture improved notably in 2020 Q3 when earnings declined by -7% and the expectation was that the last quarter of the year would show a comparable decline rate. So, it's a pleasant surprise that 2020 Q4 is on track to show a +3% earnings growth when the pre-season expectation was for an -11% decline.
The Q4 earnings season, which is now entering its final few weeks with less than 17% of S&P 500 companies still to report results, has been a very good one. Not only have an above-average proportion of companies beaten consensus estimates, but guidance has been positive as well. And it is this favorable guidance that has been helping push estimates for the current and coming quarters higher, as we will show a little later in this note.
Earnings Season Scorecard ( as of Friday, February 19) th
We now have Q4 results from 419 S&P 500 members or 83.8% of the index's total membership. The coming week brings in results from more than 700 companies in total, including 62 S&P 500 members. We will start seeing more results from the traditional brick-and-mortar retail space this week, including Macy's, Home Depot and others. Other notable companies on deck to report results this week include Nvidia, Salesforce and others.
Total Q4 earnings (or aggregate net income) for these 419 companies are up +4.5% from the same period last year on+3% higher revenues, with 79.7% beating EPS estimates and 77.3% beating revenue estimates.
The Q4 results from these index members compare favorably to what we had seen from the same group of companies in the recent past.
Not only are a historically high proportion of the reporting companies beating consensus EPS and revenue estimates, but they are also providing positive and reassuring guidance that is helping sustain the positive revisions trend that has been in place since July 2020, as the chart below shows.
This positive revisions trend appears to have gained pace and momentum over the last few weeks. We expect this trend to remain in place as we move towards the finish line in the Q4 earnings season. As indicated earlier, we have more than 700 companies on deck to report results this week, including 62 S&P members.
A number of sectors standout in coming out with impressive results, with Technology and Finance particularly notable. Results from the Construction and Basic Materials sectors are also very strong.
For the Technology sector, we now have Q4 results from 89.9% of the sector's total market cap in the index. Total earnings for these Tech companies are up +21.6% from the same period last year on +14.9% higher revenues, with 85.5% beating EPS estimates and an equal proportion beating revenue estimates.
The Overall Earnings Picture
Looking at Q4 as a whole, combining the actual results from 419 index members with estimates for the still-to-come companies, total earnings are now expected to up +3% on +2.9% higher revenues. This positive growth follows three back-to-back quarters of declines for S&P 500 earnings.
Sectors with the weakest growth remain the same ones that struggled in the first three quarters of the year, including Transportation (-91.6% earnings decline), Energy (-95.2%), and Consumer Discretionary (-62%). Q4 earnings for the Aerospace sector are now expected to be down -137.4%, largely reflecting Boeing's weak quarterly release.
On the positive side, Q4 earnings are expected to be up +170.1% at Autos, +30.7% at Construction, +28.1% at Basic Materials, +15.5% at Finance, +20% at Technology, +14.6% at Medical and +9.9% at the Retail sector.
Excluding Finance's help, Q4 earnings for the rest of the S&P 500 index would be down -0.2%, instead of up +2.9% as a whole. Q4 Earnings decline at the rate of -3.6%, instead of up +3% once Technology's strong showing is excluded.
Growth is expected to resume this year, with full-year 2021 earnings for the S&P 500 index currently expected to be up +27.7% relative to 2020 estimates. On an index 'EPS' basis, this works out to $166.82, up from $130.64 in 2020 and $156.62 in 2019.
Estimates for 2021 have been steadily going up over the last six months.
As we saw earlier with positive revisions to 2021 Q1 estimates, the revisions trend appears to have gained pace in recent weeks. That said, we strongly feel that there is significant room for further positive revisions as the overall macro backdrop stabilizes and gets clearer, particularly in the second half of the year.
For an in-depth look at the overall earnings picture and expectations for the coming quarters, please check out our weekly Earnings Trends report
>>>> The Positive and Reassuring Earnings Picture Continues +1,500% Growth: One of 2021's Most Exciting Investment Opportunities
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