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S&P 500 Earnings Season Update: October 22, 2021

Earnings

By John Butters  |  October 22, 2021

At this point in time, more S&P 500 companies are beating EPS estimates for the third quarter than average, and beating EPS estimates by a wider margin than average. Due to these positive surprises, the index is reporting higher earnings for the third quarter today relative to the end of last week and relative to the end of the quarter. The index is now reporting the third highest (year-over-year) growth in earnings since Q3 2010. Analysts also expect earnings growth of more than 20% for the fourth quarter and earnings growth of more than 40% for the full year. These above-average growth rates are due to a combination of higher earnings for 2021 and an easier comparison to weaker earnings in 2020 due to the negative impact of COVID-19 on a number of industries.

Companies Continue to Report Actual EPS Above Estimates

Overall, 23% of the companies in the S&P 500 have reported actual results for Q3 2021 to date. Of these companies, 84% have reported actual EPS above estimates, which is above the five-year average of 76%. If 84% is the final percentage for the quarter, it will tie the mark with Q2 2020 and Q3 2020 for the third highest percentage of S&P 500 companies reporting a positive earnings surprise since FactSet began tracking this metric in 2008. In aggregate, companies are reporting earnings that are 13.4% above estimates, which is also above the five-year average of 8.4%.

sp500-earnings-above-in-line-below-estimates-q3-2021

Due to the number and magnitude of these positive EPS surprises, the index is reporting higher earnings for the third 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 third quarter is 32.7% today, compared to an earnings growth rate of 30.0% last week and an earnings growth rate of 27.5% at the end of the third quarter (September 30). Positive earnings surprises reported by companies in the Information Technology, Health Care, Financials, and Communication Services sectors were mainly responsible for the improvement in overall earnings for the index during the past week. Positive earnings surprises reported by companies in the Financials sector have been the top contributor to the overall increase in earnings for the index since the end of the third quarter.

sp500-earnings-growth-q3-2021

If 32.7% is the actual growth rate for the quarter, it will mark the third highest (year-over-year) earnings growth rate reported by the index since Q3 2010, trailing only the previous two quarters. The unusually high growth rate is due to a combination of higher earnings in Q3 2021 and an easier comparison to lower earnings in Q3 2020 due to the negative impact of COVID-19 on a number of industries. All 11 sectors are reporting year-over-year earnings growth, led by the Energy, Materials, Industrials, Financials, and Information Technology sectors.

Revenues Are Also Running Ahead of Estimates for the Quarter

In terms of revenues, 75% of S&P 500 companies have reported actual revenues above estimates, which is above the five-year average of 67%. In aggregate, companies are reporting revenues that are 2.2% above the estimates, which is also above the five-year average of 1.4%.

sp500-revenues-above-in-line-below-estimates-q3-2021

Due to the number and magnitude of these positive revenue surprises, the blended revenue growth rate for the third quarter is higher now relative to the end of last week and relative to the end of the third quarter. As of today, the S&P 500 is reporting year-over-year growth in revenues of 15.3%, compared to year-over-year growth in revenues of 15.1% last week and year-over-year growth in revenues of 14.9% at the end of the third quarter (September 30). Upward revisions to revenue estimates and positive revenue surprises reported by companies in the Energy and Health Care sectors were mainly responsible for the increase in overall revenues for the index over the past week. Upward revisions to revenue estimates and positive revenue surprises reported by companies in the Financials and Energy sectors sector have been the largest contributors to the increase in the overall revenues for the index since the end of the third quarter.

sp500-revenue-growth-q3-2021

If 15.3% is the actual growth rate for the quarter, it will mark the second highest (year-over-year) revenue growth rate reported by the index since FactSet began tracking this metric in 2008, trailing only the previous quarter. All 11 sectors are reporting year-over-year growth in revenues, led by the Energy and Materials sectors.

Looking ahead, analysts project earnings growth of more than 20% for Q4 2021 and more than 40% for CY 2021.

The forward 12-month P/E ratio is 21.0, which is above the five-year average and above the 10-year average. It is also above the forward P/E ratio of 20.1 at the end of the third quarter (September 30).

During the upcoming week, 164 S&P 500 companies (including 10 Dow 30 components) are scheduled to report results for the third quarter.

Listen to Earnings Insight on the go! In our weekly Earnings Insight podcast, John Butters provides an update on S&P 500 corporate earnings and related topics based on his popular Earnings Insight publication. The podcast is made available every Monday—listen on Apple podcasts, Spotify, or factset.com.

The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.

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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).

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