S&P 500 Earnings Season Update: April 22, 2022

At this point in time, the percentage of S&P 500 companies beating EPS estimates is above the five-year average, but the magnitude of these positive surprises is below the five-year average. As a result, the index is reporting higher earnings for the first quarter today relative to the end of last week and relative to the end of the quarter. However, the index is also reporting single-digit earnings growth for the first time since Q4 2020. The lower earnings growth rate for Q1 2022 relative to recent quarters can be attributed to both a difficult comparison to unusually high earnings growth in Q1 2021 and continuing macroeconomic headwinds.

The Earnings Growth Rate Continues to Improve

Overall, 20% of the companies in the S&P 500 have reported actual results for Q1 2022 to date. Of these companies, 79% have reported actual EPS above estimates, which is above the five-year average of 77%. In aggregate, companies are reporting earnings that are 8.1% above estimates, which is below the five-year average of 8.9%.

Due to these positive EPS surprises, the index is reporting higher earnings for the first quarter today relative to the end of last week and relative to the end of the quarter. 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 first quarter is 6.6% today, compared to an earnings growth rate of 5.1% last week and an earnings growth rate of 4.7% at the end of the first quarter (March 31).

Positive earnings surprises reported by companies in multiple sectors were the responsible for the improvement in the earnings growth rate over the past week. Positive earnings surprises reported by companies in the Financials and Communication Services sectors, and upward revisions to EPS estimates for companies in the Energy sector, have been the largest contributors to the increase in the earnings growth rate since the end of the first quarter (March 31).

If 6.6% is the actual growth rate for the quarter, it will mark the lowest earnings growth rate reported by the index since Q4 2020 (3.8%). Eight of the 11 sectors are reporting year-over-year earnings growth, led by the Energy, Materials, and Industrials sectors. Three sectors are reporting a year-over-year decline in earnings, led by the Financials and Consumer Discretionary sectors.

Revenues Exceed Estimates

In terms of revenues, 69% of S&P 500 companies have reported actual revenues above estimates, which is equal to the five-year average of 69%. In aggregate, companies are reporting revenues that are 1.3% above estimates, which is below the five-year average of 1.7%.

Due to these positive revenue surprises, the index is reporting higher revenues for the first quarter today relative to the end of last week and relative to the end of the quarter. The blended revenue growth rate for the first quarter is 11.1% today, compared to a revenue growth rate of 10.9% last week and a revenue growth rate of 10.7% at the end of the first quarter (March 31).

Positive revenue surprises reported by companies in multiple sectors were responsible for the improvement in the revenue growth rate over the past week. Upward revisions to revenue estimates for companies in the Energy sector have been the largest contributor to the improvement in the revenue growth rate since the end of the first quarter (March 31).

If 11.1% is the actual growth rate for the quarter, it will mark the fifth-straight quarter of year-over-year revenue growth above 10% for the index. Ten of the 11 sectors are reporting year-over-year growth in revenues, led by the Energy, Materials, and Real Estate sectors.

Outlook for the Rest of 2022

Looking ahead, analysts expect earnings growth of 7.0% for Q2 2022, 11.7% for Q3 2022, and 11.2% for Q4 2022. For CY 2022, analysts are predicting earnings growth of 10.9%.

The forward 12-month P/E ratio is 18.6, which is equal to the five-year average (18.6) but above the 10-year average (16.8). However, it is below the forward P/E ratio of 19.4 recorded at the end of the first quarter (March 31), as prices have decreased while the forward 12-month EPS estimate has increased over the past few weeks.

During the upcoming week, 175 S&P 500 companies (including 13 Dow 30 components) are scheduled to report results for the first quarter.

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