S&P 500 companies have reported the highest earnings growth since 2010, according to FactSet, which is keeping tabs on the first-quarter earnings report season.
"At this point in time, more S&P 500 companies are beating EPS estimates for the first quarter than average and beating EPS estimates by a wider margin than average," John Butters, vice president and senior earnings analyst at FactSet, wrote. "The index is now reporting the highest year-over-year growth in earnings since Q1 2010 for Q1."
As of April 30, 60% of the companies in the S&P 500 have reported first-quarter results, with 86% beating analysts' average earnings per share estimates. That's well above the five-year average of 74%. Overall, reported earnings are 22.8% above estimates, compared to the five-year average of 6.9%.
Strong earnings have improved valuations. They have pushed the forward 12-month price-earnings ratio down to 22.0, from 38.63 back in January, and close to the historical S&P average of 19.4.
Revenues have also been robust, with 78% of S&P 500 companies reporting revenues that beat analysts' average estimates, well above the five-year average of 64%. Overall, reported revenues are 3.7% above the estimates, compared to the 1.0% five-year average.
Positive earnings and revenue surprises stretched across several sectors led by the information technology, communication services and consumer discretionary sectors.
While impressive, first-quarter 2021 earnings and revenue should be placed in the proper context. They are compared against the first quarter of 2020, which was a bad quarter due to the outbreak of the Covid-19 pandemic. And that could explain why the rally that follows good earnings reports fades a few days later in some cases.
Also, first-quarter revenue got a boost from unprecedented monetary and fiscal stimulus, which is hard to sustain without the usual side effects of rising government deficits and inflationary expectations.
Wall Street knows too well what all means for interest rates, future earnings, revenue and equity prices.
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