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2021-04-13

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Expectations Are High for This Earnings Season. Here’s What to Look For.

First-quarter earnings season kicks off this week as several large U.S. banks report their results f

Expectations Are High for This Earnings Season. Here’s What to Look For.

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Here’s What to Look For.","url":"https://stock-news.laohu8.com/highlight/detail?id=1131702206","media":"Barron's","summary":"First-quarter earnings season kicks off this week as several large U.S. banks report their results f","content":"<p>First-quarter earnings season kicks off this week as several large U.S. banks report their results for the first three months of 2021. Expectations are high, with sales and profit forecasts rising through the quarter and shares rallying into the spring. It’s likely to be a blockbuster earnings season for many companies’ fundamentals, but their stock-price reactions may be more of a letdown. Investors should look to margins, spending plans, and management commentary to get the full picture.</p><p>Wall Street analysts’ bottom-up forecast is for first-quarter S&amp;P 500 earnings per share to jump by 21% year over year on a 6.4% rise in revenue, per data from Jonathan Golub, Credit Suisse’s chief U.S. equity strategist. The biggest relative gains are naturally seen coming from the more cyclical areas of the market: the S&amp;P 500 consumer discretionary sector is expected to report earnings per share growth of 82%, followed by 77% for financials and 45% for materials.</p><p>That’s thanks to an improving economy, higher commodity prices, and an easy comparison to the year-ago period, which included several weeks of harsh lockdowns across the globe. The consensus earnings forecast is just 2% above 2019’s first quarter, before the Covid-19 pandemic. It follows 1% year-over-year profit growth in the fourth quarter of 2020. And the second quarter is expected to be even more explosive: a 51% surge in S&amp;P 500 earnings per share is the consensus estimate.</p><p>The complicating factor for investors coming into this earnings season is that a strong rebound in earnings is far from a secret. Stocks have rallied in recent months, to record highs after record highs, as the market has focused on the accelerating vaccine rollout and unfolding economic recovery.</p><p>The first quarter will be time for a growing number of companies to live up to the hype. Airlines, hotels, and the like will still likely get a pass given their particularly pandemic-sensitive businesses, and a rosy outlook might suffice there. But investors will be holding a broader range of companies to account than they have since the start of the pandemic. Rapid year-over-year growth is priced into the market.</p><p>That’s a recipe for overall lukewarm—at best—reactions to what would normally be seen as very strong earnings. Take last earnings season, when companies that beat Wall Street numbers on both revenues and earnings per share actually saw their stock prices lag behind the S&amp;P 500 by 0.1 percentage point the next day, according to Savita Subramanian, BofA Securities’ chief U.S. equity and quantitative strategist. That was the worst relative performance, or alpha, for double beats on record.</p><p>This earnings season might not be all that different on that front, Subramanian argues. “Investors were unenthused by a big beat last quarter,” she wrote on Monday. “The only time in history (since 2000) that we saw negative alpha was in 2Q00, right at the peak of the Tech Bubble. Limited rewards indicate good news being priced in, and the rally since the last earnings season plus building euphoric sentiment lead us to suspect that a significant earnings beat may not translate to big market gains.”</p><p>For reopening-sensitive companies like restaurants, retailers, and other in-person dependent businesses, the focus will likely be on management commentary about how consumer behavior evolved over the quarter as the winter spike in Covid-19 cases eased, vaccinations accelerated, and government restrictions eased in much of the country. That will be seen as a preview of what’s to come later in 2021.</p><p>Investors will also be listening intently to what management teams have to say about their supply chains and input costs. Beyond impacting profit margins, rising commodity prices and growing production constraints could keep companies from fully taking advantage of pent-up demand for their products. Warnings on that front could overshadow strong first-quarter results and lead to reduced earnings estimates for the remainder of 2021. Margins are expected to tighten for industrials and consumer staples firms, by 16% and 2%, respectively.</p><p>More quantifiably, investors will also be interested in what managements plan to do with their normalizing or growing cash flows as the pandemic recedes. “The sharp acceleration in earnings and [free cash flow] will increase the focus on how corporates decide to use their cash,” wrote UBS ’ chief U.S. equity strategist Keith Parker on Monday. “We see upside to capex and IT spend. We believe there is room to ramp up net buybacks to &gt;$600bn (+50%) this year.”</p><p>Finally, formal quarterly or full-year 2021 guidance may be the make-or-break variable for companies that didn’t surprise on earnings and sales in one direction or the other. Uncertainty regarding Covid-19 and economic outlook remain, but companies have now had a full year of operating in a pandemic, and most should be able to extrapolate the trends they’ve seen so far in 2021.</p><p>Companies reporting in the coming days include Goldman Sachs Group (ticker: GS), JPMorgan Chase (JPM), and Wells Fargo (WFC) on Wednesday, followed by Bank of America (BAC), Citigroup (C), Delta Air Lines (DAL), PepsiCo (PEP), and UnitedHealth Group (UNH) on Thursday. Kansas City Southern (KSU) and Morgan Stanley (MS) report on Friday.</p>","source":"lsy1610680873436","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Expectations Are High for This Earnings Season. 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Here’s What to Look For.\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-13 18:44 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.barrons.com/articles/expectations-are-high-for-this-earnings-season-heres-what-to-look-for-51618266227?mod=hp_LATEST><strong>Barron's</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>First-quarter earnings season kicks off this week as several large U.S. banks report their results for the first three months of 2021. Expectations are high, with sales and profit forecasts rising ...</p>\n\n<a href=\"https://www.barrons.com/articles/expectations-are-high-for-this-earnings-season-heres-what-to-look-for-51618266227?mod=hp_LATEST\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{".SPX":"S&P 500 Index",".DJI":"道琼斯",".IXIC":"NASDAQ Composite","SPY":"标普500ETF"},"source_url":"https://www.barrons.com/articles/expectations-are-high-for-this-earnings-season-heres-what-to-look-for-51618266227?mod=hp_LATEST","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1131702206","content_text":"First-quarter earnings season kicks off this week as several large U.S. banks report their results for the first three months of 2021. Expectations are high, with sales and profit forecasts rising through the quarter and shares rallying into the spring. It’s likely to be a blockbuster earnings season for many companies’ fundamentals, but their stock-price reactions may be more of a letdown. Investors should look to margins, spending plans, and management commentary to get the full picture.Wall Street analysts’ bottom-up forecast is for first-quarter S&P 500 earnings per share to jump by 21% year over year on a 6.4% rise in revenue, per data from Jonathan Golub, Credit Suisse’s chief U.S. equity strategist. The biggest relative gains are naturally seen coming from the more cyclical areas of the market: the S&P 500 consumer discretionary sector is expected to report earnings per share growth of 82%, followed by 77% for financials and 45% for materials.That’s thanks to an improving economy, higher commodity prices, and an easy comparison to the year-ago period, which included several weeks of harsh lockdowns across the globe. The consensus earnings forecast is just 2% above 2019’s first quarter, before the Covid-19 pandemic. It follows 1% year-over-year profit growth in the fourth quarter of 2020. And the second quarter is expected to be even more explosive: a 51% surge in S&P 500 earnings per share is the consensus estimate.The complicating factor for investors coming into this earnings season is that a strong rebound in earnings is far from a secret. Stocks have rallied in recent months, to record highs after record highs, as the market has focused on the accelerating vaccine rollout and unfolding economic recovery.The first quarter will be time for a growing number of companies to live up to the hype. Airlines, hotels, and the like will still likely get a pass given their particularly pandemic-sensitive businesses, and a rosy outlook might suffice there. But investors will be holding a broader range of companies to account than they have since the start of the pandemic. Rapid year-over-year growth is priced into the market.That’s a recipe for overall lukewarm—at best—reactions to what would normally be seen as very strong earnings. Take last earnings season, when companies that beat Wall Street numbers on both revenues and earnings per share actually saw their stock prices lag behind the S&P 500 by 0.1 percentage point the next day, according to Savita Subramanian, BofA Securities’ chief U.S. equity and quantitative strategist. That was the worst relative performance, or alpha, for double beats on record.This earnings season might not be all that different on that front, Subramanian argues. “Investors were unenthused by a big beat last quarter,” she wrote on Monday. “The only time in history (since 2000) that we saw negative alpha was in 2Q00, right at the peak of the Tech Bubble. Limited rewards indicate good news being priced in, and the rally since the last earnings season plus building euphoric sentiment lead us to suspect that a significant earnings beat may not translate to big market gains.”For reopening-sensitive companies like restaurants, retailers, and other in-person dependent businesses, the focus will likely be on management commentary about how consumer behavior evolved over the quarter as the winter spike in Covid-19 cases eased, vaccinations accelerated, and government restrictions eased in much of the country. That will be seen as a preview of what’s to come later in 2021.Investors will also be listening intently to what management teams have to say about their supply chains and input costs. Beyond impacting profit margins, rising commodity prices and growing production constraints could keep companies from fully taking advantage of pent-up demand for their products. Warnings on that front could overshadow strong first-quarter results and lead to reduced earnings estimates for the remainder of 2021. Margins are expected to tighten for industrials and consumer staples firms, by 16% and 2%, respectively.More quantifiably, investors will also be interested in what managements plan to do with their normalizing or growing cash flows as the pandemic recedes. “The sharp acceleration in earnings and [free cash flow] will increase the focus on how corporates decide to use their cash,” wrote UBS ’ chief U.S. equity strategist Keith Parker on Monday. “We see upside to capex and IT spend. We believe there is room to ramp up net buybacks to >$600bn (+50%) this year.”Finally, formal quarterly or full-year 2021 guidance may be the make-or-break variable for companies that didn’t surprise on earnings and sales in one direction or the other. Uncertainty regarding Covid-19 and economic outlook remain, but companies have now had a full year of operating in a pandemic, and most should be able to extrapolate the trends they’ve seen so far in 2021.Companies reporting in the coming days include Goldman Sachs Group (ticker: GS), JPMorgan Chase (JPM), and Wells Fargo (WFC) on Wednesday, followed by Bank of America (BAC), Citigroup (C), Delta Air Lines (DAL), PepsiCo (PEP), and UnitedHealth Group (UNH) on Thursday. Kansas City Southern (KSU) and Morgan Stanley (MS) report on Friday.","news_type":1},"isVote":1,"tweetType":1,"viewCount":824,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":7,"xxTargetLangEnum":"ORIG"},"commentList":[],"hasMoreComment":false,"orderType":2}

Expectations Are High for This Earnings Season. Here’s What to Look For.

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