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%).
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.
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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