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On Monday, both the S&P 500 and the Nasdaq reached new highs.
NYSE
Companies are providing earnings predictions once again, and they’re optimistic about the future. More stock increases are likely as a result of this optimism. Last year, several management teams canceled their predictions since the epidemic made it practically impossible to predict earnings accurately.
Only 53 S&P 500 businesses provided guidance in the second quarter of 2020, for example. Investors were left to make educated predictions based on immunization rates, stimulus packages, and whatever information was available in quarterly financial reports. According to DataTrek, the number of S&P 500 businesses that made estimates in the second quarter of 2021 is 103, about double the same period last year. And since earnings season hasn’t even begun, that number should rise. Companies aren’t just projecting again; they’re forecasting bigger earnings than analysts. 66 companies have offered greater outlook than analysts so far in the second quarter. All of these factors point to earnings projections being excessively low, according to Nicholas Colas, co-founder of DataTrek. Analysts’ current consensus estimate for S&P 500 earnings per share for the second quarter is $44.79, considerably behind their expectation for the first quarter of $49. Colas argues that the combination of increased corporate guidance and a low second-quarter earnings prediction “suggests that the Street is likely still excessively conservative for most of the index’s components.” The bottom line is that stocks can still rise from here. “Q2 2021 earnings season needs to show considerable upside to Wall Street expectations to keep the current US bull market on track, and the recent two weeks’ ‘guidance season’ shows that it should,” Colas says. Be sure to read those earnings reports as they come in, investors. Jacob Sonenshine can be reached at jacob.sonenshine@barrons.com.
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