Another Perspective On S&P 500 Earnings

The regular update will be out this weekend, but I wanted to show readers some of FundStrat’s earnings work as well as bring in some Refinitiv tables that have never been used.

Tom Lee started Fundstrat a few years ago, and this blog became a subscriber this year. It’s good research, and even has a crypto perspective, which admittedly isn’t read that much.

The first table: S&P 500 Q2 ’22 EPS growth by sector:

The second table: Q2 ’22 S&P 500 revenue growth:

Despite the tough compares with last year (Q2 ’21 S&P 500 EPS and revenue growth was +96% and +25% respectively (yes, not a typo, of course that’s against Covid and Q2 ’20’s tough quarter), but still Q2 ’22 revenue growth is looking to be mid-teens, and still healthy. Expected S&P 500 revenue growth will decline in Q3 ’22 to 10% and then in Q4 ’22 to 7% per the current estimates.

Third table: Refinitiv’s S&P 500 EPS growth “ex-energy”

The fact that Q2 and Q3 ’22 are expected to be the toughest comps for the S&P 500 “ex-energy” (look at the bottom line after you click on and enlarge the above graph) is probably a mild positive.

Fourth table: Refinitiv’s S&P 500 revenue growth “ex-energy”:

The fact that “expected” S&P 500 revenue growth for the next 4 quarters will return to mid-single digits is actually not a bad thing either in terms of the S&P 500 earnings story because it keeps expectations subdued, and mid single-digit revenue growth is within a very normal range of expectations.

Summary/conclusion: Tom Lee is a long-time favorite market prognosticator, who is remarkably humble and understated. He’s been bullish in 2022 – as this blog has been – but that’s okay.

Given the 26% annualized return for the S&P 500 from 2019, 2021 and 2021, it was normal to expect a pullback this year when the Fed withdrew liquidity. Jay Powell gave us plenty of advance warning about a tighter Fed monetary policy and now we are in the thick of it.

The normal S&P 500 earnings update will be out this weekend but it’s important to use other sources so readers can see many opinions. Ed Yardeni cut his 2022 S&P 500 EPs estimate to $215 in EPS per share, which is a modest cut from the $228 area where the annual EPS was gyrating around at the beginning of July ’22.

Looking at the annual EPS estimates, Refinitiv data now is estimating 8% annual EPS growth for ’22, ’23 and ’24 or over the next three years. That’s about consistent with the long-run average of SP 500 EPS growth and is now approaching “normal” expectations and growth rates.

The great Covid unwind continues and as we (readers) move through Q4 and Q4 ’22, the world will return to normal (we hope).

More to come this weekend.

Thanks for reading.

Original Post

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.