By Tom Burnett CFA
With the bulk of the company reports for Q4 of 2021 available, analysts are now focusing their efforts on 2022 estimates. Our data points come from the FACTSET report for January 28, 2022. The 2021 performance of the S/P 500 Index was encouraging as the Index earnings grew sharply from the negative Covid-19 impact in 2020. The 2021 final figure is not available, but the announced figures suggest an Index earnings of $205.51 for the year, up some 46% from the $140.46 total in 2020. The FACTSET consensus for 2022 is now $223.94, up some 9% from the 2021 level. In its October 29, 2021 report, FACTSET published an estimate for 2022 of $220.49, indicating that analysts are taking a more positive view of corporate earnings performance this year. The early forecasts for 2023 are projecting another 9+% increase to the $246 level.
The Q4 2021 performance was excellent as FACTSET uses a growth rate of 24.3% over the Q4 2020 earnings level. If achieved, that performance will be the fourth consecutive quarter of year-over-year earnings growth of more than 20%.
The January market correction has brought the earnings multiple down from over 22x to 20.3x based on the latest 2022 earnings estimates. While down from recent levels, the P-E ratio remains above the recent 5-year and 10-year averages which are 18.5x and 16.7x respectively.
Tom Burnett CFA is Director of Research