With early reporters in the door (10.9% of market cap), our current estimate for 2Q2021 S&P 500 operating earnings per share (EPS) is $46.19 ($36.82 ex-financials).
If realized, this would represent year-over-year (y/y) earnings growth of 72.4% and an increase of 15.1% from 2Q19. However, earnings growth is slowing on a sequential basis, with current estimates pointing to a contraction of 2.6% quarter-over-quarter. At the sector level, financial company results have beaten expectations; however, this was primarily driven by another round of reserve releases, and the key question going forward will center on the consumer’s willingness to take on more debt. The industrial sector is set to see significant y/y gains in EPS, as the airline industry is expected to be cash flow positive and profitable for the first time since the pandemic began. As the earnings season continues to unfold, we expect materials, health care and technology to post strong results compared to both last year and 2019. Looking ahead, current full year consensus estimates are tracking y/y EPS growth of 57.6% for 2021 and 10.6% for 2022; if these forecasts are realized, and 2023 sees earnings grow at an average page, the S&P 500 forward P/E ratio could fall to 20.1x by 4Q22, assuming the S&P 500 price index grows at its historical average growth rate. However, much of this will depend on whether companies can defend profit margins, particularly in the wake of higher costs as reflected in the June CPI report.
Happy Monday. Good Luck out there this week.
Global Spotlight
South Africa’s former president goes back on trial. Former South African President Jacob Zuma’s corruption trial, where he is being accused of corruption and fraud relating to a late 1990s arms deal, will resume on July 19. Zuma’s July 7 arrest in connection to a different investigation triggered a week of riots and looting in Gauteng and KwaZulu-Natal provinces, forcing South Africa’s military to be deployed.
New Northern Ireland protocol proposals. The U.K. government is expected to unveil proposals to amend the controversial Northern Ireland protocol of the EU-UK Withdrawal Agreement next week.
A high-level U.S. tour of Asia. U.S. Deputy Secretary of State Wendy Sherman will visit Japan, South Korea and Mongolia next week in her second regional tour after a May-June Southeast Asia trip. Focus topics will include North Korea, the Mongolia strategic partnership, climate change, health issues and China’s growing regional clout.
Belarusian opposition leader to visit the U.S. Svetlana Tikhanovskaya will arrive for a week-long working visit to the United States on July 18. The opposition politician and her team members plan to visit Washington D.C, New York and California for meetings with government officials, politicians, experts and the Belarusian diaspora to secure support and discuss the United States’ possible role in resolving the country’s political crisis.
The Summer Olympic Games kick-off in Japan. After a year-long delay and amid massive domestic controversy, the Tokyo Summer Olympic Games will run from July 23 to Aug. 8. The games will begin under a pandemic-related cloud, with the government having been compelled at the last minute to ban domestic spectators amid rising COVID-19 cases, which forced the city of Tokyo to reenter a state of emergency on July 12.
Stratfor.com
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Weeks Numbers
Review Last weeks numbers here.
Earnings
Source I/B/E/S data from Refinitiv
Aggregate Estimates and Revisions
- 21Q2 earnings are expected to increase 72.0% from 20Q2. Excluding the energy sector, the earnings growth estimate is 58.5%.
- Of the 41 companies in the S&P 500 that have reported earnings to date for 21Q2, 90.2% have reported earnings above analyst expectations. This compares to a long-term average of 66% and prior four quarter average of 83%.
- 21Q2 revenue is expected to increase 19.2% from 20Q2. Excluding the energy sector, the growth estimate is 15.9%.
- During the week of July 19, 81 S&P 500 companies are expected to report quarterly earnings.
If you find this post helpful, please pass along to the investment community. If you would like to see any additional information, drop us a line and let us know.
