S&P 500 Earnings Season Update: April 29, 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.

Higher-Than-Average Number of Companies Beating Earnings Estimates

Overall, 55% of the companies in the S&P 500 have reported actual results for Q1 2022 to date. Of these companies, 80% have reported actual EPS above estimates, which is above the five-year average of 77%. In aggregate, companies are reporting earnings that are 3.4% 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 7.1% today, compared to an earnings growth rate of 6.5% 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 (led by the Information Technology, Health Care, and Communication Services sectors), partially offset by a negative earnings surprise reported by a company in the Consumer Discretionary sector, were responsible for the improvement in the earnings growth rate over the past week. Positive earnings surprises reported by companies in the Information Technology, Financials, Communication Services, and Health Care sectors, again partially offset by a negative earnings surprise reported by a company in the Consumer Discretionary sector, have been the largest contributors to the increase in the earnings growth rate since the end of the first quarter (March 31).

If 7.1% 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%). Nine of the 11 sectors are reporting year-over-year earnings growth, led by the Energy, Materials, and Industrials sectors. On the other hand, two sectors are reporting a year-over-year decline in earnings: Consumer Discretionary and Financials.

Energy Companies Are Driving Overall Revenue Growth Higher

In terms of revenues, 72% of S&P 500 companies have reported actual revenues above estimates, which is above the five-year average of 69%. In aggregate, companies are reporting revenues that are 2.2% above estimates, which is also above 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 12.2% today, compared to a revenue growth rate of 11.1% 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 (led by the Energy sector) were responsible for the improvement in the revenue growth rate over the past week. Upward revisions to revenue estimates and positive revenue surprises reported by companies in the Energy sector have also been the largest contributors to the improvement in the revenue growth rate since the end of the first quarter (March 31).

If 12.2% 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 5.5% for Q2 2022, 10.9% for Q3 2022, and 10.5% for Q4 2022. For CY 2022, analysts are predicting earnings growth of 10.3%.

The forward 12-month P/E ratio is 18.1, which is below the five-year average (18.6) but above the 10-year average (16.9). It is also 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 month.

During the upcoming week, 160 S&P 500 companies are scheduled to report results for the first quarter.

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