Key Points

  • With less than 10% of the S&P 500 having reported, results are strong and have boosted the blended consensus for first quarter year-over-year earnings growth from 25% to nearly 31%.

  • Both the beat rate, and the percent by which companies have been beating estimates, are well above historical norms.

  • The denominator effect of improving earnings (E) is helping ease some valuation concerns; but overall, the market remains historically expensive.

Although it’s early in the first quarter earnings reporting season, it’s worth a look at the progress so far and the implications for the rest of the season, as well as valuations. Less than 10% of S&P 500 companies have reported; but to sum it up, so far so very good. Based on Refinitiv data, the year-over-year “blended” earnings growth estimate (combining actual reports to date with consensus estimates) has jumped to nearly 31%. If it remains at that level, it would be the highest quarterly growth rate since the fourth quarter of 2010.

In aggregate, companies have reported earnings 30.8% above expectations; compared to a long-term (since 1994) average of 3.5% above estimates and average of 15.2% for the past four quarters. The percent of companies reporting better-than-expected earnings (“beat rate”) is 85%; with only 13% having reported weaker-than-expected earnings (“miss rate”). That compares to an average beat rate of 65% and miss rate of 20% since 1994; and an average beat rate of 78% and miss rate of 19% over the past four quarters.


The table below highlights the blended earnings growth rates for the S&P 500 overall; as well as each of the 11 sectors. Prior to reporting season getting underway, the first quarter growth estimate for the S&P 500 was 25%; which as noted has already jumped to nearly 31% thanks to the strength of the season so far. Topping the rankings in terms of growth rate for the quarter is the Financials sector—with a whopping 116% growth expected—followed by Consumer Discretionary. Looking ahead to next quarter, we can see that the traditionally most-cyclical sectors—notably Industrials and Energy—join Consumer Discretionary with eye-popping growth rates of more than 500% in the case of Industrials; and more than 200% in the case of Consumer Discretionary and Energy. These exceptionally strong gains are courtesy of “base effects” and the math associated with year-over-year comparisons relative to the second quarter of 2020; when much of the global economy was in lock-down.