S&P 500 Earnings Season Update: January 28, 2022

Due to these positive EPS surprises, the index is reporting higher earnings for the fourth quarter today relative to the end of last week and relative to the end of the third 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 fourth quarter is 24.3% today, compared to an earnings growth rate of 23.1% last week and an earnings growth rate of 21.4% at the end of the fourth quarter (December 31).

Positive earnings surprises reported by companies in the Information Technology sector, partially offset by a negative surprise reported by a company in the Industrials sector, were mainly responsible for the improvement in overall earnings for the index during the past week. Positive earnings surprises reported by companies in the Information Technology and Financials sectors have been the top contributors to the overall increase in earnings for the index since the end of the fourth quarter. On the other hand, a negative surprise reported by a company in the Industrials sector has been the top detractor to the overall increase in earnings for the index since the end of the fourth quarter.

If 24.3% is the actual growth rate for the quarter, it will mark the fourth straight quarter of earnings growth of 20% or more for the index. The last time the index reported four straight quarters of earnings growth above 20% was Q4 2009 through Q3 2010. The unusually high growth rate is due to a combination of higher earnings in Q4 2021 and an easier comparison to lower earnings in Q4 2020 due to the negative impact of COVID-19 on a number of industries. Ten sectors are reporting year-over-year earnings growth, led by the Energy, Industrials, and Materials sectors.

Larger-Than-Average Positive Revenue Surprises

In terms of revenues, 75% of S&P 500 companies have reported actual revenues above estimates, which is above the five-year average of 68%. In aggregate, companies are reporting revenues that are 2.5% above the estimates, which is also above the five-year average of 1.5%.

Due to these positive revenue surprises, the blended revenue growth rate for the fourth quarter is higher now relative to the end of last week and relative to the end of the fourth quarter. The blended revenue growth rate for the fourth quarter is 13.9% today, compared to a revenue growth rate of 13.1% last week and a revenue growth rate of 12.8% at the end of the fourth quarter (December 31).

Positive revenue surprises reported by companies in the Energy and Information Technology sectors were mainly responsible for the increase in overall revenues for the index over the past week. Positive revenue surprises reported by companies in the Energy and Information Technology sectors have also been the largest contributors to the increase in the overall revenues for the index since the end of the fourth quarter.

If 13.9% is the actual growth rate for the quarter, it will mark the third highest (year-over-year) revenue growth rate reported by the index since FactSet began tracking this metric in 2008, trailing only the previous two quarters. All 11 sectors are reporting year-over-year growth in revenues, led by the Energy and Materials sectors.

Looking Ahead to 2022

For the full year, the blended earnings growth rate for CY 2021 is 45.5%. Looking ahead to the first half of CY 2022, analysts expect earnings growth of 5.6% for Q1 2022 and 4.3% for Q2 2022.

The forward 12-month P/E ratio is 19.2, which is above the five-year average (18.5) and above the 10-year average (16.7). However, It is below the forward P/E ratio of 21.3 recorded at the end of the fourth quarter (December 31), as prices have decreased while EPS estimates have increased over the past month.

During the upcoming week, 109 S&P 500 companies (including two Dow 30 components) are scheduled to report results for the fourth quarter.

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