Record-High Number of S&P 500 Companies Issuing Positive EPS and Sales Guidance for Q1

Heading into the end of the first quarter, 94 S&P 500 companies have issued EPS guidance for the quarter. This number is below the five-year average of 101. Of these 94 companies, 34 have issued negative EPS guidance and 60 have issued positive EPS guidance. The number of companies issuing negative EPS guidance is well below the five-year average of 66, while the number of companies issuing positive EPS guidance is well above the five-year average of 35.

If 60 is the final number of S&P 500 companies issuing positive EPS guidance for the quarter, it will mark the highest number of S&P 500 companies issuing positive EPS guidance for a quarter since FactSet began tracking this metric in 2006. The current record is 57, which occurred in the previous quarter (Q4 2020).

Why are so many companies issuing positive EPS guidance for the first quarter? One of the main drivers is likely the high number of companies issuing positive revenue guidance for the first quarter.

As of today, 86 S&P 500 companies have issued revenue guidance for the first quarter. This number is above the five-year average of 77. Of these 86 companies, 17 have issued negative revenue guidance and 69 have issued positive revenue guidance. The number of companies issuing negative revenue guidance is well below the five-year average of 39, while the number of companies issuing positive revenue guidance is well above the five-year average of 38.

If 69 is the final number of S&P 500 companies issuing positive revenue guidance for the quarter, it will mark the highest number of S&P 500 companies issuing positive revenue guidance for a quarter since FactSet began tracking this metric in 2006. The current record is 62, which occurred in the previous quarter (Q4 2020).

Of the 60 companies in the S&P 500 that have issued positive EPS guidance for Q1 2021, 41 of these companies (68%) have also issued positive revenue guidance for Q1 2021.

Positive Guidance for the Information Technology Sector

At the sector level, the Information Technology sector has the highest number of companies issuing positive EPS guidance and positive revenue guidance of all 11 sectors.

In terms of EPS guidance, 29 companies in the Information Technology sector have issued positive EPS guidance for the first quarter, which is well above the five-year average of 17 for this sector. If 29 is the final number for the quarter, it will tie the mark with the previous quarter (Q4 2020) for the highest number of companies issuing positive EPS guidance for this sector since FactSet began tracking this metric in 2006. At the industry level, the Semiconductor & Semiconductor Equipment industry has the highest number of companies in the sector issuing positive EPS guidance in this sector at 10.

In terms of revenue guidance, 43 companies in the Information Technology sector have issued positive revenue guidance for the first quarter, which is well above the five-year average of 22 for this sector. If 43 is the final number for the quarter, it will mark the highest number of companies issuing positive revenue guidance for this sector since FactSet began tracking this metric in 2006. The current record is 35, which occurred in the previous quarter (Q4 2020). At the industry level, the Semiconductor & Semiconductor Equipment industry has the highest number of companies in the sector issuing positive revenue guidance in this sector at 17.

Of the 29 companies in the Information Technology sector that have issued positive EPS guidance for Q1 2021, 26 of these companies (90%) have also issued positive revenue guidance for Q1 2021.

Due in part to the large number of companies issuing positive EPS and revenue guidance in this sector, expectations for year-over-year earnings and revenue growth for the Information Technology sector are higher now relative to the start of the quarter.

The Information Technology sector is currently projected to report year-over-year earnings growth of 22.3%, compared to an estimate for year-over-year earnings growth of 11.6% on December 31. The Semiconductor & Semiconductor Equipment industry is projected to report year-over-year earnings growth of 24.3% today, compared to an estimate for year-over-year earnings growth of 5.2% on December 31.

The Information Technology sector is currently projected to report year-over-year revenue growth of 15.5%, compared to an estimate for year-over-year revenue growth of 10.0% on December 31. The Semiconductor & Semiconductor Equipment industry is projected to report year-over-year revenue growth of 19.4% today, compared to an estimate for year-over-year revenue growth of 8.0% on December 31.

It is interesting to note that despite the high number of companies in the Information Technology sector issuing positive EPS and revenue guidance and the upward revisions to EPS and revenue estimates for companies in the Information Technology sector by analysts, the market has not rewarded companies in this sector in recent months. Since December 31, the Information Technology sector has seen a decrease in price of 0.8% (to 2272.90 from 2291.28). By comparison, nine of the other 10 sectors in the S&P 500 have seen an increase in price over this time frame, Overall, the S&P 500 has seen an increase in price of 4.1% (to 3909.52 from 3756.07) since December 31. However, it should also be noted that the Information Technology sector also had the largest price increase of all 11 sectors during all of 2020 at 42.2%. The forward 12-month P/E ratio for the Information Technology sector is 25.4, which is above the five-year average of 19.6 and above the 10-year average of 16.5.

The term “guidance” (or “preannouncement”) is defined as a projection or estimate for EPS (or revenue) provided by a company in advance of the company reporting actual results. Guidance is classified as negative if the estimate (or mid-point of a range estimates) provided by a company is lower than the mean EPS estimate (or revenue estimate) the day before the guidance was issued. Guidance is classified as positive if the estimate (or mid-point of a range of estimates) provided by the company is higher than the mean EPS estimate (or revenue estimate) the day before the guidance was issued.

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