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S&P 500 CY 2020 Earnings Preview: Largest Year-Over-Year Earnings Decline Since 2008

Earnings

By John Butters  |  December 11, 2020

CY 2020 Earnings Decline: -13.7%

The estimated (year-over-year) earnings decline for the S&P 500 for CY 2020 is -13.7%, which is below the 10-year average (annual) earnings growth rate of 10.0%. If -13.7% is the actual decline for the year, it will mark the largest annual earnings decline reported by the index since CY 2008 (-25.5%). The unusually large decrease in earnings can be attributed to the negative impact of COVID-19 on a number of industries in the index. At the sector level, four sectors are projected to report year-over-year growth in earnings, led by the Health Care sector. Seven sectors are expected to report a year-over-year decline in earnings, led by the Energy, Industrials, Consumer Discretionary, and Financials sectors.

S&P 500 Earnings and Revenue Growth 2015 to 2020

The Health Care sector is expected to report the highest (year-over-year) earnings growth of all 11 sectors at 10.5%. At the industry level, five of the six industries in this sector are predicted to report year-over-year growth in earnings. Four of these five industries are projected to report double-digit earnings growth: Life Sciences Tools & Services (25%), Biotechnology (15%), Health Care Providers & Services (11%), and Pharmaceuticals (11%).

The Energy sector is expected to report the highest (year-over-year) earnings decline of all 11 sectors at -107.2%. Lower oil prices are helping to drive the decline in earnings for the sector, as the average price of oil in CY 2020 to date ($38.85) is 32% lower than the average price of oil in CY 2019 ($57.04). At the sub-industry level, all five sub-industries in the sector are projected to report a decline in earnings. Three of these sub-industries are predicted to report a decline in earnings of more than 100%: Oil & Gas Refining & Marketing (-137%), Integrated Oil & Gas (-124%), and Oil & Gas Exploration & Production (-108%).

The Industrials sector is expected to report the second-largest (year-over-year) earnings decline of all 11 sectors at -48.4%. At the industry level, eight of the 12 industries in this sector are expected to report a decline in earnings. Five of these eight industries are expected to report a double-digit decline in earnings: Airlines (-345%), Industrial Conglomerates (-35%), Machinery (-22%), Electrical Equipment (-15%), and Road & Rail (-10%). The Airlines industry is also projected to be the largest contributor to the year-over-year decline in earnings for the sector. If the five companies in this industry were excluded, the estimated earnings decline for the sector would improve to -14.2% from -48.4%.

The Consumer Discretionary sector is expected to report the third largest (year-over-year) earnings decline of all 11 sectors at -33.4%. At the industry level, six of the 10 industries in this sector are expected to report a decline in earnings. Five of these six industries are projected to report a double-digit decline in earnings: Hotels, Restaurants, & Leisure (-139%), Auto Components (-49%), Automobiles (-42%), Textiles, Apparel, & Luxury Goods (-25%), and Leisure Products (-11%). On the other hand, four industries in this sector are expected to report earnings growth, led by the Multiline Retail (36%) and Household Durables (16%) industries.

The Financials sector is expected to report the fourth largest (year-over-year) earnings decline of all 11 sectors at -26.1%. At the industry level, four of the five industries in this sector are expected to report a decline in earnings. Two of these four industries are projected to report a double-digit decline in earnings: Consumer Finance (-67%) and Banks (-41%). The only industry in this sector expected to report earnings growth is the Capital Markets (6%) industry.

S&P 500 Earnings Growth CY2020

CY 2020 Revenue Decline: -1.8%

The estimated (year-over-year) revenue decline for CY 2020 is -1.8%, which is below the 10-year average (annual) revenue growth rate of 4.5%. If -1.8% is the actual decline for the year, it will mark the largest annual revenue decline for the index since CY 2015 (-3.6%). The decrease in revenues can be attributed to the negative impact of COVID-19 on a number of industries in the index. At the sector level, five sectors are expected to report year-over-year growth in revenues, led by the Health Care sector. Six sectors are expected to report a year-over decline in revenues, led by the Energy and Industrials sectors.

The Health Care sector is expected to report the highest (year-over-year) revenue growth of all 11 sectors at 8.9%. At the industry level, five of the six industries in this sector are predicted to report year-over-year growth in revenues. Two of these five industries are projected to report double-digit revenue growth: Biotechnology (17%) and Life Sciences Tools & Services (11%).

The Energy sector is expected to report the highest (year-over-year) revenue decline of all 11 sectors at -33.8%. Lower oil prices are helping to drive the decline in revenues for the sector, as the average price of oil in CY 2020 to date ($38.85) is 32% lower than the average price of oil in CY 2019 ($57.04). At the sub-industry level, all five sub-industries in the sector are projected to report a double-digit decline in revenues. Three of these sub-industries are predicted to report a decline in revenues of more than 30%: Oil & Gas Refining & Marketing (-39%), Oil & Gas Exploration & Production (-39%), and Integrated Oil & Gas (-32%).

The Industrials sector is expected to report the second-largest (year-over-year) revenue decline of all 11 sectors at -13.1%. At the industry level, 11 of the 12 industries in this sector are expected to report a decline in revenues. Four of these 11 industries are expected to report a double-digit decline in revenues, led by the Airlines (-63%) industry. The Airlines industry is also projected to be the largest contributor to the year-over-year decline in revenues for the sector. If the five companies in this industry were excluded, the estimated revenue decline for the sector would improve to -6.2% from -13.1%.

S&P 500 Revenue Growth CY2020

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John Butters

Vice President, Senior Earnings Analyst, Investor Relations

Mr. John Butters is Vice President and Senior Earnings Analyst at FactSet. His weekly research report, “Earnings Insight,” provides analysis and commentary on trends in corporate earnings data for the S&P 500 including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, The Financial Times, The New York Times, MarketWatch, and Yahoo! Finance. Mr. Butters has over 15 years of experience in the financial services industry. Prior to FactSet in January 2011, he worked for more than 10 years at Thomson Reuters (Thomson Financial), most recently as Director of U.S. Earnings Research (2007-2010).

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