S&P 500 earnings season update: April 29, 2022

At this time, the percentage of S&P 500 companies that beat EPS estimates was above the five-year average, but the magnitude of these positive surprises is below the five-year average. As a result, the index is posting higher first-quarter earnings today compared to the end of last week and compared to the end of the quarter. However, the index also records single-digit earnings growth for the first time since the fourth quarter of 2020. The lower rate of earnings growth for the first quarter of 2022 compared to recent quarters can be attributed to the difficult comparison with the unusually high earnings growth in the first quarter of 2021 and continuing. Macroeconomic headwinds.

Number of above-average companies beating earnings estimates

Overall, 55% of companies in the S&P 500 have reported actual results for the first quarter of 2022 to date. Among these companies, 80% reported higher than estimated actual EPS, which is higher than 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 posting higher first-quarter earnings today compared to the end of last week and compared to the end of the quarter. First-quarter earnings growth (which combines actual results for companies that have reported estimated results for companies that haven’t yet) was 7.1% today, compared to last week’s 6.5% earnings growth rate and earnings growth rate. 4.7% at the end of the first quarter (March 31).

Positive earnings surprises reported by companies in multiple sectors (led by the IT, healthcare and telecoms services sectors), partially offset by a negative earnings surprise reported by a company in the consumer discretionary segment, were responsible for the improvement in earnings growth over the past week. Positive earnings surprises reported by companies in the IT, financial, telecom services, and healthcare sectors, which were again partially offset by a negative earnings surprise reported by a company in the consumer appreciation segment, were the largest contributors to the earnings growth rate since the end of the first quarter ( March 31).

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If 7.1% is the actual growth rate for the quarter, it would represent the lowest earnings growth rate the index has recorded since the fourth quarter of 2020 (3.8%). Nine of the 11 sectors reported year-over-year earnings growth, led by the Energy, Materials, and Industrial sectors. On the other hand, there are two sectors that are recording a decline in profits on an annual basis: consumer discretionary and the financial sector.

Energy companies drive overall revenue growth

In terms of revenue, 72% of S&P 500 companies report actual revenue above estimates, which is above the five-year average of 69%. In aggregate, companies are reporting revenue 2.2% above estimates, which is also higher than the five-year average of 1.7%.

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Because of these positive surprises in revenue, the index records higher revenues for the first quarter today compared to the end of last week and compared to the end of the quarter. Q1 mixed revenue growth is 12.2% today, compared to an 11.1% revenue growth rate last week and a 10.7% revenue growth rate 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 revenue growth over the past week. Upward revisions to revenue estimates and positive revenue surprises reported by companies in the energy sector were the biggest contributors to the improvement in revenue growth since the end of the first quarter (March 31).

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If 12.2% is the quarter’s actual growth rate, it represents the fifth consecutive quarter of year-over-year revenue growth above 10% for the index. Ten of the 11 segments recorded annual revenue growth, led by the Energy, Materials, and Real Estate segments.

Outlook for the rest of 2022

Looking ahead, analysts expect earnings growth of 5.5% for the second quarter of 2022, 10.9% for the third quarter of 2022, and 10.5% for the fourth quarter of 2022. For 2022, analysts expect earnings growth of 10.3%.

The forward 12-month P/E ratio is 18.1, which is lower than the five-year average (18.6) but higher than 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 fallen while 12-month EPS estimates have increased over the past month.

Over the next week, 160 companies on the Standard & Poor’s 500 Index are scheduled to report first-quarter results.

Hear earnings statistics on the go! in our area John Butters’ weekly Earnings Insight podcast provides an update on corporate earnings on the S&P 500 and related topics based on his popular Earnings Insight post. Podcasts are available every Monday – listen to them on Apple podcasts, Spotify, or factset.com.

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