S&P 500 Is Reporting Third Highest Net Profit Margin Since 2008 for Q3

Given concerns in the market about rising inflation, what is the S&P 500 reporting for a net profit margin in the third quarter?

The blended (combines actual results for companies that have reported and estimated results for companies that have yet to report) net profit margin for the S&P 500 for Q3 2021 is 12.3%, which is above the year-ago net profit margin and above the five-year average net profit margin (10.9%). However, it is below the previous quarter’s record-high net profit margin of 13.1%. If 12.3% is the actual net profit margin for the quarter, it will mark the third highest net profit margin reported by the index since FactSet began tracking this metric in 2008, trailing only the previous two quarters.

On June 30, the estimated net profit margin for the third quarter was 12.0%. Thus, the net profit margin is slightly higher today relative to expectations at the start of the third quarter.

Sector Level Analysis

At the sector level, eight sectors are reporting (or are expected to report) a year-over-year increase in their net profit margins in Q3 2021 compared to Q3 2020, led by the Energy (8.7% vs. NA) and Materials (14.0% vs. 9.5%) sectors. A year-ago net profit margin has not been calculated for the Energy sector due to the earnings loss reported by the sector in Q3 2020. Eight sectors are reporting (or are expected to report) net profit margins in Q3 2021 that are above their five-year averages, led by the Materials (14.0% vs. 9.5%), Utilities (16.8% vs. 12.9%), and Energy (8.7% vs. 4.9%) sectors. However, only two sectors are expected to report a quarter-over-quarter increase in their net profit margins for Q3 2021 compared to Q2 2021: Energy (8.7% vs. 6.5%) and Utilities (16.8% vs. 15.0%).

Analysts also believe net profit margins for the S&P 500 will continue to be above 12.0% for the remainder of 2021 and the first half of 2022. As of today, the estimated net profit margins for Q4 2021, Q1 2022, and Q2 2022 are 12.1%, 12.5%, and 12.8%, respectively.

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.