Featured Image

S&P 500 Earnings Preview: CY 2020

Earnings

By John Butters  |  December 20, 2019

CY 2020 Earnings Growth: 9.6%

The estimated (year-over-year) earnings growth rate for CY 2020 is 9.6%, which is above the 10-year average (annual) earnings growth rate of 9.1%. All 11 sectors are projected to report year-over-year growth in earnings. Five sectors are predicted to report double-digit growth, led by the Energy, Industrials, and Materials sectors.

S&P 500 Historical Earnings and Revenue Growth

The Energy sector is expected to report the highest (year-over-year) earnings growth of all 11 sectors at 21.4%. However, it is interesting to note the estimated average price of oil for CY 2020 ($56.02) is slightly below the average price of oil to date for CY 2019 ($56.92). At the sub-industry level, five sub-industries are projected to report growth in earnings. Four of these five sub-industries are expected to report double-digit growth: Oil & Gas Refining & Marketing (47%), Oil & Gas Equipment & Services (26%), Integrated Oil & Gas (19%), and Oil & Gas Storage & Transportation (13%). The only sub-industry predicted to report a year-over-year decline in earnings is the Oil & Gas Drilling (-66%) sub-industry.

S&P 500 Earnings Growth CY2020

The Industrials sector is expected to report the second highest (year-over-year) earnings growth of all 11 sectors at 14.8%. At the industry level, 11 of the 12 industries in this sector are predicted to report growth in earnings.  Five of these 11 industries are projected to report double-digit growth, led by the Aerospace & Defense (49%), Building Products (16%), and Construction & Engineering (15%) industries. The Machinery industry (-1%) is the only industry expected to report a year-over-year decline in earnings.

At the company level, Boeing is expected to be the largest contributor to earnings growth for the sector. The mean EPS estimate for Boeing for FY 2020 is $18.43, compared to the mean EPS estimate of $0.94 for FY 2019. If this company were excluded, the estimated earnings growth rate for this sector would fall to 7.3% from 14.8%

The Materials sector is expected to report the third highest (year-over-year) earnings growth of all 11 sectors at 13.4%. At the industry level, three of the four industries in the sector are projected to report a growth in earnings: Metals & Mining (50%), Construction Materials (19%), and Chemicals (13%). The Containers & Packaging (-2%) industry is the only industry projected to report a decline in earnings for the year.

CY 2020 Revenue Growth: 5.4%

The estimated (year-over-year) revenue growth rate for CY 2020 is 5.4%, which is above the 10-year average (annual) revenue growth rate of 3.8%. All 11 sectors are expected to report year-over-year growth in revenues, led by the Communication Services sectors.

S&P 500 Revenue Growth CY2020

The Communication Services sector is predicted to report the highest (year-over-year) growth rate of all 11 sectors at 9.1%. At the industry level, all five industries are expected to report revenue growth, led by the Interactive Media & Services (18%) and Entertainment (14%) industries.

More International Exposure = Higher Earnings & Revenue Growth

S&P 500 companies with more international revenue exposure are expected to report higher earnings relative to S&P 500 companies with less international revenue exposure in CY 2020. For S&P 500 companies that generate more than 50% of revenue outside the U.S., the estimated earnings growth rate is 13.8%. For S&P 500 companies that generate more than 50% of revenue inside the U.S., the estimated earnings growth rate is 7.6%.

S&P 500 Estimated Earnings Growth CY2020

S&P 500 companies with more international revenue exposure are also expected to report higher revenues relative to S&P 500 companies with less international revenue exposure in CY 2020. For S&P 500 companies that generate more than 50% of revenue outside the U.S., the estimated revenue growth rate is 6.5%. For S&P 500 companies that generate more than 50% of revenue inside the U.S., the blended revenue growth rate is 5.0%.

S&P 500 Estimated Revenue Growth CY2020

We will not be publishing the FactSet Earnings Insight report on December 27. The next edition of the report is scheduled to be published on January 3.

Download the latest Earnings Insight

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).

Comments