S&P 500 Earnings Growth Rate for Q1 Is Now More Than Double the Estimate on March 31

As of today, the blended (combines actual results for companies that have reported and estimated results for companies that have yet to report) earnings growth rate for the S&P 500 for the first quarter is 49.4%, which is more than double the estimated earnings growth rate of 23.8% at the end of the first quarter (March 31). If 49.4% is the actual growth rate for the first quarter, it will mark the highest year-over-year earnings growth rate reported by the index since Q1 2010 (55.4%).

What Is Driving the Increase in Earnings for the Index Since March 31?

During the first quarter earnings season, more companies have beaten EPS estimates than average and by a wider margin than average. To date, 88% of the companies in the S&P 500 have reported actual results for the first quarter. Of these companies, 86% have reported actual EPS above estimates, which is above the five-year average of 74%. If 86% is the final percentage for the quarter, it will mark the highest percentage of S&P 500 companies reporting a positive EPS surprise since FactSet began tracking this metric in 2008. In aggregate, companies are reporting earnings that are 22.1% above the estimates, which is also above the five-year average of 6.9%. If 22.1% is the final percentage for the quarter, it will mark the second-largest earnings surprise percentage reported by the index since FactSet began tracking this metric in 2008. It should be noted that S&P 500 companies are beating EPS estimates that increased during the first quarter. On December 31, the estimated earnings growth for Q1 2021 was 15.8%. By March 31, it had improved to 23.8%.

In aggregate, these positive earnings surprises have led to a net $71.5 billion increase in earnings (to $421.2 billion from $349.7 billion) for the index since March 31, as higher actual earnings have replaced estimated earnings in the growth rate calculation during the earning season. As a result, 10 of the 11 sectors have higher earnings growth rates (or smaller earnings declines) today compared to March 31. However, four sectors have been the largest contributors to the $71.5 billion increase in earnings for the index over this period: Financials, Information Technology, Communication Services, and Consumer Discretionary. Combined, these four sectors account for $59.5 billion (83%) of the total $71.5 billion increase in earnings for the index since March 31.

Sector Breakdown

The Financials sector is the largest contributor to this increase in earnings, accounting for about $26.2 billion of the net $71.5 billion increase. The positive earnings surprises reported by JPMorgan Chase ($4.50 vs $3.10), Goldman Sachs ($18.60 vs. $10.22), Citigroup ($3.62 vs. $2.60), Bank of America ($0.86 vs. $0.66), Wells Fargo ($1.05 vs. $0.70), Capital One Financial ($7.03 vs. $4.12), Morgan Stanley ($2.22 vs. $1.72), and American Express ($2.74 vs. $1.61) have been substantial contributors to the increase in the earnings growth rate for the index since the end of the first quarter (March 31). As a result, the blended earnings growth rate for the Financials sector has increased to 144.7% from 72.7% over this period.

The Information Technology sector is the second-largest contributor to this increase in earnings, accounting for about $11.9 billion of the net $71.5 billion increase. The positive earnings surprises reported by Apple ($1.40 vs $0.99), Microsoft ($1.95 vs. $1.78), and Intel ($1.39 vs. $1.15) have been significant contributors to the increase in the earnings growth rate for the index since the end of the first quarter (March 31). As a result, the blended earnings growth rate for the Information Technology sector increased to 40.4% from 22.3% over this period.

The Communication Services sector is the third-largest contributor to this increase in earnings, accounting for about $11.6 billion of the net $71.5 billion increase. The positive earnings surprises reported by Alphabet ($26.29 vs. $15.81) and Facebook ($3.30 vs. $2.35) have been substantial contributors to the increase in the earnings growth rate for the index since the end of the first quarter (March 31). As a result, the blended earnings growth rate for the Communication Services sector has increased to 50.5% from 13.4% over this period.

The Consumer Discretionary sector is the fourth-largest contributor to this increase in earnings, accounting for about $9.9 billion of the net $71.5 billion increase. The positive earnings surprises reported by Amazon.com ($15.79 vs $9.54), Ford Motor ($0.89 vs. $0.35), and General Motors ($2.25 vs. $1.12) have been significant contributors to the increase in the earnings growth rate for the index since the end of the first quarter (March 31). As a result, the blended earnings growth rate for this sector has increased to 202.5% from 103.4% over this period.

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