S&P 500 CY 2022 Earnings Preview: Record-High Net Profit Margin Expected in 2022

CY 2022 Earnings Growth: 9.0%

Even with a difficult comparison to (expected) record-high earnings growth of 45.1% in CY 2021, analysts still expect the S&P 500 to report high, single-digit earnings growth in CY 2022. The estimated (year-over-year) earnings growth rate for CY 2022 is 9.0%, which is above the trailing 10-year average (annual) earnings growth rate of 5.0% (2011 – 2020). Ten of the 11 sectors are projected to report year-over-year growth in earnings, led by the Industrials, Consumer Discretionary, and Energy Care sectors. The Financials sector is the only sector projected to report a year-over-year decline in earnings.

The Industrials sector is expected to report the highest (year-over-year) earnings growth rate of all 11 sectors at 35.9%. At the industry level, all 12 industries in the sector are projected to report a year-over-year increase in earnings. A growth rate is not being calculated for the Airlines industry due to the expected loss for the industry in CY 2021. However, the Airlines industry is predicted to report a profit in CY 2022 ($4.5 billion) relative to a loss in CY 2021 (-$15.0 billion). Ten of the remaining 11 industries are predicted to report double-digit growth, led by the Aerospace & Defense (29%), Construction & Engineering (26%), and Industrials Conglomerates (22%) industries. The Airlines industry is also the expected to be the largest contributor to earnings growth for the sector in CY 2022. If this industry were excluded, the estimated earnings growth rate for the Industrials sector would fall to 16.9% from 35.9%.

The Consumer Discretionary sector is expected to report the second highest (year-over-year) earnings growth rate of all 11 sectors at 32.2%. At the industry level, all 10 industries in this sector are projected to report a year-over-year increase in earnings. Seven of these 10 industries are predicted to report double-digit earnings growth, led by the Hotels, Restaurants, & Leisure (1,209%), Auto Components (48%), and Internet & Direct Marketing Retail (24%) industries. The Hotels, Restaurants, & Leisure industry is also the expected to be the largest contributor to earnings growth for the sector in CY 2022. If this industry were excluded, the estimated earnings growth rate for the Consumer Discretionary sector would fall to 14.2% from 32.2%.

The Energy sector is expected to report the third highest (year-over-year) earnings growth rate of all 11 sectors at 28.4%. At the sub-industry level, four of the five sub-industries in the sector are projected to report double-digit earnings growth: Oil & Gas Refining & Marketing (128%), Oil & Gas Equipment & Services (56%), Oil & Gas Exploration & Production (39%), and Integrated Oil & Gas (16%). On the other hand, the Oil & Gas Storage & Transportation (-6%) is the only sub-industry expected to report a year-over-year decline in earnings for the year

The Financials sector is the only sector expected to report a year-over-year decline in earnings at -8.9%. At the industry level, three of five industries in this sector are projected to report a decline in earnings: Consumer Finance (-19%), Banks (-15%) and Capital Markets (-4%). On the other hand, the Diversified Financial Services (8%) and Insurance (3%) industries are predicted to report year-over-year growth in earnings for the year. The Banks industry is also the expected to be the largest contributor to decline in earnings for the sector in CY 2022. If this industry were excluded, the estimated earnings decline for the Financials sector would improve to -3.3% from -8.9%.

CY 2022 Revenue Growth: 7.3%

Even with a difficult comparison to (expected) record-high revenue growth of 15.8% in CY 2021, analysts still expect the S&P 500 to report high, single-digit revenue growth in CY 2022. The estimated (year-over-year) revenue growth rate for CY 2022 is 7.3%, which is above the trailing 10-year average (annual) revenue growth rate of 3.5% (2011 – 2020). All 11 sectors are projected to report year-over-year growth in revenues, led by the Consumer Discretionary and Industrials sectors.

The Consumer Discretionary sector is expected to report the highest (year-over-year) revenue growth rate of all 11 sectors at 14.1%. At the industry level, all 10 industries in this sector are projected to report a year-over-year increase in revenues. Six of these 10 industries are predicted to report double-digit revenue growth: Hotels, Restaurants, & Leisure (39%), Automobiles (21%), Internet & Direct Marketing Retail (17%), Auto Components (15%), Textiles, Apparel, & Luxury Goods (11%), and Household Durables (11%). The Hotels, Restaurants, & Leisure, Internet & Direct Marketing Retail, and Automobiles industries are also the expected to be the largest contributors to revenue growth for the sector in CY 2022. If these three industries were excluded, the estimated revenue growth rate for the Consumer Discretionary sector would fall to 6.1% from 14.1%.

The Industrials sector is expected to report the second highest (year-over-year) revenue growth rate of all 11 sectors at 11.4%. At the industry level, all 12 industries in the sector are projected to report a year-over-year increase in revenues. Four of these 12 industries are predicted to report double-digit growth: Airlines (50%), Construction & Engineering (25%), Machinery (11%), and Aerospace & Defense (11%). The Airlines industry is also the expected to be the largest contributor to revenue growth for the sector in CY 2022. If this industry were excluded, the estimated revenue growth rate for the Industrials sector would fall to 8.2% from 11.4%.

CY 2022 Net Profit Margin: 12.8%

The estimated net profit margin (based on aggregate estimates for revenues and earnings) for the S&P 500 for 2022 is 12.8%. Despite concerns about labor shortages, higher inflation, and supply chain disruptions, if 12.8% is the actual net profit margin for the index in CY 2022, it will mark the highest (annual) net profit margin for the index since FactSet began tracking this metric in CY 2008. The current record is 11.5%, which occurred in CY 2018. Analysts are currently expecting a net profit margin of 12.6% for CY 2021. At the sector level, six of the 11 sectors are projected to report higher net profit margins in CY 2022 relative to expectations for CY 2021, led by the Industrials (10.3% vs. 8.4%) and Energy (9.3% vs. 7.6%) sectors. On the other hand, five sectors are projected to report lower net profit margins in CY 2022 relative to expectations for CY 2021, led by the Financials (17.6% vs. 19.8%) sector.

At the company level, 71% of S&P 500 companies are projected to report a higher net profit margin in CY 2022 relative to expectations for net profit margins in CY 2021.

Listen to Earnings Insight on the go! In our weekly Earnings Insight podcast, John Butters provides an update on S&P 500 corporate earnings and related topics based on his popular Earnings Insight publication. The podcast is made available every Monday—listen on Apple podcasts, Spotify, or factset.com.

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.