For Immediate Release

Chicago, IL – July 1, 2021 – Zacks Director of Research Sheraz Mian says, “A big part of the strong Q2 earnings growth is easy comparisons to the year-earlier period. But Q2 estimates also reflect genuine growth, with total index earnings expected to be up 9.6%."

Q2 Earnings Growth Reflects More than Easy Comps

Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>

Here are the key points:

• Total Q2 earnings for the S&P 500 index are expected to be up +61.6% from the same period last year on +18.1% higher revenues, which would follow the +49.3% earnings growth on +10.3% higher revenues in 2021 Q1.
• Given the magnitude of positive earnings surprises we saw in the preceding reporting cycle and the persistent positive revisions to earnings estimates, we expect the final Q2 earnings growth tally to be significantly higher than the current expected +61.6%.
• A big part of the strong Q2 earnings growth is easy comparisons to the year-earlier period that represented the bottom of the Covid-19 earnings impact. But Q2 estimates also reflect genuine growth, with total index earnings expected to be up +9.6% from the pre-Covid 2019 Q2 period.
• Total 2021 Q2 earnings for 9 of the 16 Zacks sectors are expected to be up from the pre-Covid 2019 Q2 period, including Technology (up +31.8%), Basic Materials (+77.4%), Medical (+20.3%), Retail (+25.6%), Construction (+58.9%).
• Sectors whose 2021 Q2 earnings are expected to remain below the comparable 2019 period include Transportation (down -68.1%), Consumer Discretionary (-48.9%), Autos (-50.0%), and Energy (-12.7%).
• Estimates for Q2 and beyond have been steadily going up, with the current +61.6% earnings growth rate up from +50.6% at the end of March and +41.6% at the start of January 2021.
• Companies with fiscal quarters ending in May, which we count as part of the Q2 tally, have started reporting already. Thus far, we have seen such results from 15 S&P 500 members.
• Looking at the calendar-year picture for the S&P 500 index, earnings are projected to climb +35.4% on +10.7% higher revenues in 2021 and increase +11.2% on +6.4% higher revenues in 2022. This would follow a decline of -13.1% in 2020 on -1.7% lower revenues.
• The implied ‘EPS’ for the S&P 500 index, calculated using the current 2021 P/E of 23.3X and index close, as of June 29th, is $184.28, up from $136.06 in 2020. Using the same methodology, the index ‘EPS’ works out to $205.00 for 2022 (P/E of 20.9X). The multiples have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.

Last year’s June quarter represented the peak of the pandemic’s earnings impact when S&P 500 earnings dropped -32.2% from the year-earlier period. Four of the 16 Zacks quarters – Consumer Discretionary, Autos, Energy & Transportation – actually lost money in 2020 Q2. To get a sense of these sectors’ losses in the year-earlier period, take a quick look at the 2020 Q2 results from bellwether operators in each of these sectors.

Marriott International (MAR Quick QuoteMAR - Free Report) , part of the Zacks Consumer Discretionary sector, lost -$0.64 per share in 2020 Q2. Similarly, General Motors (GM Quick QuoteGM - Free Report) – part of the Zacks Auto sector), ExxonMobil (XOM Quick QuoteXOM - Free Report)  – part of the Zacks Energy sector) and United Airlines (UAL Quick QuoteUAL - Free Report)  – part of the Zacks Transportation sector) lost, on a per share basis, -$0.50, -$0.70, and -$9.31, in the year-earlier period, respectively.

In the aggregate, the Zacks Consumer Discretionary sector lost $251 million in 2020 Q2, while the Auto, Energy and Transportation sectors lost $1.2 billion, $9.6 billion and $5.3 billion, respectively.

It is this low earnings quarter that is the base period for 2021 Q2 and a major reason for the outsized +61.6% earnings growth expected in the quarter. If the past is any guide, the final growth tally could be as high as +80%.

We should keep in mind, however, that easy comps aren’t the sole reason for the strong growth, as current 2021 Q2 earnings estimates represent a +9.6% growth over the comparable period in 2019. In fact, 9 of the 16 Zacks sectors are currently expected to earn more in 2021 Q2 than they did in the pre-Covid 2019 Q2 period.

The Earnings Big Picture

We remain positive in our earnings outlook, as we see the full-year 2021 growth picture steadily improving, with the aforementioned revisions trend accelerating in the back half of the year.

Bitcoin, Like the Internet Itself, Could Change Everything

Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.

Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.

See 3 crypto-related stocks now >>

Follow us on Twitter:  https://twitter.com/zacksresearch

Join us on Facebook:  https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

https://www.zacks.com

Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.