Record-High Number of S&P 500 Companies Issuing Positive EPS and Sales Guidance for Q2

Heading into the end of the second quarter, 103 S&P 500 companies have issued EPS guidance for the quarter. This number is above the five-year average of 100. Of these 103 companies, 37 have issued negative EPS guidance and 66 have issued positive EPS guidance. The number of companies issuing negative EPS guidance is well below the five-year average of 63, while the number of companies issuing positive EPS guidance is well above the five-year average of 37.

If 66 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 59, which occurred in the previous quarter (Q1 2021).

Positive Revenue Guidance

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

As of today, 85 S&P 500 companies have issued revenue guidance for the second quarter. This number is above the five-year average of 77. Of these 85 companies, 17 have issued negative revenue guidance and 68 have issued positive revenue guidance. The number of companies issuing negative revenue guidance is well below the five-year average of 37, while the number of companies issuing positive revenue guidance is well above the five-year average of 40.

If 68 is the final number of S&P 500 companies issuing positive revenue guidance for the quarter, it will mark the second-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 71, which occurred in the previous quarter (Q1 2021).

Of the 66 companies in the S&P 500 that have issued positive EPS guidance for Q2 2021, 41 of these companies (62%) have also issued positive revenue guidance for Q2 2021.

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, 28 companies in the Information Technology sector have issued positive EPS guidance for the second quarter, which is well above the five-year average of 18 for this sector. If 28 is the final number for the quarter, it will tie the mark with the previous quarter (Q1 2021) for the second-highest number of companies issuing positive EPS guidance for this sector since FactSet began tracking this metric in 2006. The current record is 29, which occurred in Q4 2020. 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, 44 companies in the Information Technology sector have issued positive revenue guidance for the first quarter, which is well above the five-year average of 23 for this sector. If 44 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 43, which occurred in the previous quarter (Q1 2021). 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 16.

Of the 28 companies in the Information Technology sector that have issued positive EPS guidance for Q2 2021, 27 of these companies (96%) have also issued positive revenue guidance for Q2 2021.

Due in part to the large number of companies issuing positive EPS and revenue guidance in this sector for the second quarter, expectations for year-over-year earnings and revenue growth for the Information Technology sector for the second quarter 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 30.6% for Q2, compared to an estimate for year-over-year earnings growth of 19.3% on March 31. The Semiconductor & Semiconductor Equipment industry is currently projected to report year-over-year earnings growth of 40.4% for Q2, compared to an estimate for year-over-year earnings growth of 28.0% on March 31.

The Information Technology sector is currently projected to report year-over-year revenue growth of 16.8% for Q2, compared to an estimate for year-over-year revenue growth of 12.4% on March 31. The Semiconductor & Semiconductor Equipment industry is currently projected to report year-over-year revenue growth of 23.3% for Q2, compared to an estimate for year-over-year revenue growth of 17.1% on March 31.

It is interesting to note that with the high number of companies in the Information Technology sector issuing positive guidance and the upward revisions to estimates for companies in this sector by analysts, the market has rewarded companies in this sector in recent months. Since March 31, the Information Technology sector has seen an increase in price of 9.6% (to 2554.32 from 2331.06), which is the fourth highest increase of all 11 sectors during this period. Overall, the S&P 500 has seen an increase in price of 7.4% (to 4266.49 from 3972.89) since March 31.

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 midpoint 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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