AllMarket Outlook
logoArgusApril 12, 2021

Daily Spotlight: EPS Season Begins

Market Outlook
Bullish - Short term

The big banks are typically the first to report earnings, and those announcements are about to begin. The accelerating trend in vaccines, successful passage of the Biden administration's $1.9 trillion stimulus package, and optimism on infrastructure investment are all pushing consensus earnings expectations higher. Although the pandemic appears to be easing, the economy has undergone fundamental changes that appear to be permanent. Work and education have shifted to a hybrid model, and we anticipate continued accelerated investment in digitization. The year 2021 should also feature a reversal in 2020's "deadweight" sectors, such as Industrials and Energy, which were subtractive to overall prior-year earnings. Based on our multi-input model, we recently increased our estimate of S&P 500 earnings from continuing operations for 2021 to $176 from $171. Our revised 2021 EPS model assumes 28% growth from our static 2020 estimate; we had previously modeled 24% growth. Off the higher 2021 base, and on the assumption that positive economic momentum can be carried forward, we raised our estimate of S&P 500 earnings from continuing operations for 2022 to $201 from $195. Our revised 2022 EPS model assumes 14% growth from our 2021 estimate, in line with earlier expectations.

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