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S&P 500 CY 2021 Earnings Preview: Record-High Earnings and Sales Growth in CY 2021

Earnings

By John Butters  |  December 17, 2021

CY 2021 Earnings Growth: 45.1%

The estimated (year-over-year) earnings growth rate for CY 2021 is 45.1%, which is above the trailing 10-year average (annual) earnings growth rate of 5.0% (2011 – 2020). If 45.1% is the actual growth rate for the year, it will mark the highest annual earnings growth rate reported by the index since FactSet began tracking this metric in 2008. The current record is 39.6%, which occurred in CY 2010. The unusually high growth rate for the year is due to a combination of higher earnings for 2021 and an easier comparison to weaker earnings in 2020 due to the negative impact of COVID-19 on a number of industries. All 11 sectors are projected to report year-over-year growth in earnings, led by the Energy, Industrials, Materials, Consumer Discretionary, and Financials sectors.

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The Energy sector is expected to report earnings of $77.6 billion for CY 2021 compared to a loss of -$5.2 billion in CY 2020. Thus, a year-over-year growth rate is not being calculated for the Energy sector due to the loss reported by the sector in CY 2020. Higher year-over-year oil prices are contributing to the year-over-year improvement in earnings for this sector, as the average price of oil to date in CY 2021 ($67.87) is 73% above the average price for oil in CY 2020 ($39.34). At the sub-industry level, all five sub-industries in the sector are expected to report a year-over-year increase in earnings. A growth rate is not being calculated for three of these five sub-industries due to losses reported last year. However, all three are expected to report profits in CY 2021: Integrated Oil & Gas, Oil & Gas Exploration & Production, and Oil & Gas Refining & Marketing. The other two sub-industries that are expected to report year-over-year growth are the Oil & Gas Equipment & Services (116%) and the Oil & Gas Storage & Transportation (51%) sub-industries. At the company level, Exxon Mobil and Chevron are expected to be the largest contributors to the year-over-year improvement in earnings for the sector. Combined, these two companies account for $39.2 billion of the projected $82.8 billion year-over-year increase in earnings for the sector.

The Industrials sector is expected to report the highest (year-over-year) earnings growth rate of all 11 sectors at 97.8%. At the industry level, all 12 industries in the sector are projected to report a year-over-year improvement in earnings. A growth rate is not being calculated for the Airlines industry due to the loss reported by the industry in the previous year. However, the Airlines industry is predicted to report a smaller loss in CY 2021 (-$14.7 billion) relative to the loss in CY 2020 (-$32.6 billion). The remaining 11 industries are predicted to report double-digit growth, led by the Aerospace & Defense (145%), Air Freight & Logistics (44%), and Machinery (40%) industries. The Airlines industry is also the expected to be the largest contributor to earnings growth for the sector in CY 2021. If this industry were excluded, the estimated earnings growth rate for the Industrials sector would fall to 43.0% from 97.8%.

The Materials sector is expected to report the second highest (year-over-year) earnings growth rate of all 11 sectors at 85.4%. At the industry level, all four industries in this sector are projected to report a year-over-year increase in earnings. Three of these four industries are predicted to report double-digit earnings growth: Metals & Mining (252%), Chemicals (75%), and Containers & Packaging (27%). At the company level, Nucor, Dow, LyondellBasell Industries, and Freeport-McMoRan are expected to be the largest contributors to year-over-year earnings growth for the sector. If these four companies were excluded, the estimated earnings growth rate for the Materials sector would fall to 30.6% from 85.4%.

The Consumer Discretionary sector is expected to report the third highest (year-over-year) earnings growth rate of all 11 sectors at 69.4%. At the industry level, all 10 industries in this sector are projected to report a year-over-year increase in earnings. A growth rate is not being calculated for the Hotels, Restaurants, & Leisure industry due to the loss reported by the industry in the previous year. However, the Hotels, Restaurants, & Leisure industry is predicted to report a profit in CY 2021 ($1.9 billion) relative to the loss in CY 2020 (-$15.2 billion). Eight of the remaining nine industries are predicted to report double-digit growth, led by the Automobiles (117%) and Textiles, Apparel, & Luxury Good (61%) industries. The Hotels, Restaurants, & Leisure industry is also the expected to be the largest contributor to earnings growth for the sector in CY 2021. If this industry were excluded, the estimated earnings growth rate for the Consumer Discretionary sector would fall to 38.9% from 69.4%.

The Financials sector is expected to report the fourth highest (year-over-year) earnings growth rate of all 11 sectors at 59.7%. At the industry level, all five industries in this sector are projected to report a year-over-year increase in earnings of 15% or more: Consumer Finance (247%), Banks (85%), Capital Markets (37%), Diversified Financial Services (21%), and Insurance (19%).

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CY 2021 Revenue Growth: 15.8%

The estimated (year-over-year) revenue growth rate for CY 2021 is 15.8%, which is above the trailing 10-year average (annual) revenue growth rate of 3.5% (2011 – 2020). If 15.8% is the actual growth rate for the year, it will mark the highest annual revenue growth rate reported by the index since FactSet began tracking this metric in 2008. The current record is 10.6%, which occurred in CY 2011. Again, the unusually high growth rate for the year is due to a combination of higher revenues for 2021 and an easier comparison to weaker revenues in 2020 due to the negative impact of COVID-19 on a number of industries. All 11 sectors are projected to report year-over-year growth in revenues, led by the Energy and Materials sectors.sp-500-revenue-growth-cy2021

The Energy sector is expected to report the highest revenue growth of all 11 sectors at 59.1%. Higher year-over-year oil prices are contributing to the year-over-year improvement in earnings for this sector, as the average price of oil to date in CY 2021 ($67.87) is 73% above the average price for oil in CY 2020 ($39.34). At the sub-industry level, four of the five sub-industries in the sector are expected to report double-digit growth in revenues: Oil & Gas Exploration & Production (109%), Integrated Oil & Gas (62%), Oil & Gas Refining & Marketing (60%), and Oil & Gas Storage & Transportation (45%). The Oil & Gas Equipment & Services (-1%) is the only sub-industry expected to report a year-over-year decline in revenues.

The Materials sector is expected to report the second-highest (year-over-year) revenue growth rate of all 11 sectors at 26.1%. At the industry level, all four industries in this sector are projected to report a year-over-year increase in revenues of 10% or more: Metals & Mining (57%), Chemicals (26%), Construction Materials (14%), and Containers & Packaging (10%).

CY 2021 Net Profit Margin: 12.6%

The estimated net profit margin (based on aggregate estimates for revenues and earnings) for the S&P 500 for CY 2021 is 12.6%. Despite concerns about labor shortages, higher inflation, and supply chain disruptions, if 12.6% is the actual net profit margin for the index, it will mark the highest (annual) net profit margin reported by the index since FactSet began tracking this metric in CY 2008. The current record is 11.5%, which occurred in CY 2018. However, it should be noted that analysts expect the index to report an even higher net profit margin (12.8%) in CY 2022.

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At the sector level, 10 of the 11 sectors are projected to report higher net profit margins in CY 2021 relative to CY 2020, led by the Energy (7.6% vs. N/A) and Financials (19.8% vs. 13.4%) sectors.

Author’s Note: The FactSet Earnings Insight report will not be published on December 24 or December 31. The next edition of the report will be published on January 7.

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The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.

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John Butters

Vice President, Senior Earnings Analyst

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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