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Upbeat Q1 profit projections

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Yahoo Finance’s Julie Hyman and Brian Sozzi break down first quarter growth expectations for companies.

Video Transcript

JULIE HYMAN: The increase in profit that corporate America is expecting, that is Brian Sozzi's Take this morning. We're looking at this huge GDP growth. And one would then tend to think perhaps big profits will come with that.

BRIAN SOZZI: Yeah, Julia, it could be, the market is traded sideways for about two and a half weeks. But if first quarter earnings season is any indication, the market could come back alive again. And I have a larger piece on this now on Yahoo Finance homepage. But when you're looking at some profit projections for the first quarter, and they're simply breathtaking. First quarter EPS for the S&P 500 pegged at 23.3% year over year. If that is hit or even beaten, it would be the fastest since the third quarter of 2008.

This data comes to me compliments of the folks at FactSet. 8 sectors out of 11 we'll see earnings growth. Consumer discretionary is expected to lead the way with 104% year over year increase in earnings. Three sectors will show declines, led by industrials at about a 16% decline. And you look at these numbers, Julie, and there are at least a couple of reasons why analysts or why investors might see gains like this, easy comparisons to a year ago. We were just talking to AtHome CEO Lee Bird on Friday. He's seeing sales rise close to 150% in the first quarter because his business was completely shut down last year.

So those comparisons will be favorable. Also, people returning to work, more money in their pocket. They have gone out there and spend. And speaking of spending, a lot of folks have just received their stimulus checks, the latest round of stimulus checks. They are out there. We've written about this extensively, all those pieces are out there on Yahoo Finance. But people are out there spending aggressively their stimulus checks, whether that's at grocery stores, whether that's at department stores. They're out there spending these things. And it could provide a big boost to a lot of companies.

I'll also note too, Julie, sales for the first quarter pegged at about 6.3% year over year. That won't be above the five-year average of 3.5%. So a large part of this is in fact being driven by sales, that is the margin and earnings upside. But also, companies have done a pretty good job keeping costs under control during the pandemic.

JULIE HYMAN: I mean, I know I'm looking way out here, but I'm really interested to see once we get back to some kind of normalization. Because even when you're looking to next year's first quarter, it's still not going to be kind of more normal to more normal. You really are going to have to wait to get, I don't know, maybe to the fourth quarter of next year versus the fourth quarter of this year, because you do have those depressive effects from the pandemic still making their way through the economy. So I don't know if that's too far the future for us to be looking at this point, Brian.

BRIAN SOZZI: Now you're just showing off, Julie. Those are what we call stacked comparisons on Wall Street. Stock comparisons. Not to get all wonky.

JULIE HYMAN: Well, now you're showing off. I didn't even know what they were called.