May marked a turnaround in the earnings estimates of the large listed companies in Europe and the US. The reopening of economies together with the advance of vaccination have turned 2021 into an exercise that goes against the current in analysts’ forecasts, since historically these started from a higher point in January and then moderated as the months progressed. But in 2021 the situation is the opposite.
If the joint profit expected for the companies of the S&P 500 is compared, the EuroStoxx 50 and also the Ibex 35 are today 20% higher , on average, than they were on January 1 for the year 2021 and 10% higher for fiscal year 2022.
At the investor level, this abrupt change in forecasts works in favor of those who buy stock today , despite what it may seem based on profit multipliers with expensive bags. The PER of the Ibex , today at 17 times, is 37% higher than 12.4 times its historical averagesince 2000.
Now, the growth of benefits at double-digit rates causes this same variable to fall to 15 times in one year and to 13 in two years. It is the same situation for the US, where its benchmark index trades at 23 times / profit, 40% higher than the 16.5 of its historical average – it normalizes in two years to 19 times – and Europe registers a premium of 45%, with a PER of 18 times which is 15 for the benefit within two years.
In this balance, it is worth highlighting the upward revision carried out by the Ibex 35 firms – which Santander and ArcelorMittal champion for the end of the year – and which have led the selective to improve the estimates by 29% for 2021 since January, when it is expected that its earnings exceed 37.3 billion euros compared to losses of 4 billion last year.
“The economic recovery is progressing faster than expected and, above all, the normalization of corporate profits has exceeded the most optimistic expectations,” said Yves Bonzon, CIO of Juius Baer.
“The strong economic restart is reflected in strong first quarter earnings results. Nearly 90% of companies in the S&P 500 Index of US stocks beat analyst expectations, and nearly 75% of the Stoxx Europe 600 Index “They highlight from BlackRock, a manager that believes that the trend has already begun to appreciate in the first quarterly accounts.
Everything to the cycle
What is expected of the Ibex 35 ? The national selective accounts for the largest increase in forecasts when compared to the S&P 500 and the EuroStoxx 50 for 2021, which suggests that it may seek to shorten distances with the EuroStoxx. The 35-point lead of the community index – over a 5-year period – is almost double what they were just before the 2020 crash .
However, since January, estimates have improved by 29% for this year , which is an average of 5% per month. Looking ahead to 2022, the group of 35 could earn just over 42,000 million euros and touch 47,000 million in 2023 , the second largest profit in its history, above the 42,997 in 2017 and 2,000 below the 49,500 of the year 2010.
In which companies is this improvement most noticeable? In the steel companies, ArcelorMittal and Acerino x, and in banking, led in the improvement of forecasts by Sabadell – although it is also the one who started from a lower point – both for this year and for next. Today it is believed that the Mittal steelmaker will be the first for Ibex profits in 2021, with more than 6,900 million euros, 250% more than expected in January and 54% above the consensus of April.
In European terms, the consensus foresees a joint profit for the EuroStoxx 50 of 208,400 million euros -it is 16% higher than the estimates at the beginning of the year-, and that it will close to 233,000 in 2022. The improvement of the forecasts is almost identical for the S&P 500, which will make a profit of $ 1.74 trillion this year and hit 1.91 trillion in 2022.
“The most important thing is to know when corporate profits will be the same again. And the answer is this is this has been the case since the first quarter of 2021, and that they have not only recovered the levels of 2019, but have surpassed them. At least in the two main benchmark indices: S&P 500 and EuroStoxx 50. Unfortunately, not the Ibex 35, which It will not achieve this until 2023 “, points out Bankinter.
Energy and cycle lead the table
The values most linked to raw materials, such as oil and steel companies, have led the growth of forecasts since the beginning of the year on both sides of the Atlantic. Within the S&P 500, the crude producer ConocoPhillips, the steel producer Nucor Corporation and the energy distributor Devon Energy stand out in the first three positions, with an improvement in their estimates since January 1 that goes from 530% to 230%.
In the EuroStoxx 50 these positions are held by the oil company Eni, Daimler and TotalEnergy.