(Thanks to David Aurelio and Tajinder Dhillon of Refinitiv IBES for providing the above data.)
Here is what struck me about the above data:
1.) The expected 2020 EPS growth for the Financial sector improved right around the time in July ’20 when bank earnings and other financial earnings began to get reported. The expected 2020 EPS growth rate improved from -36% to -32% by the end of July ’20 but has remained stagnant since.
2.) 2020’s expected revenue decline improved slightly as well from -8% to -7%, and also has remained stable for the rest of August and September ’20.
3.) 2021 expected EPS growth was offsetting the expected 2020 decline up until July 24th, and then, from that week forward, the expected 2020 decline in EPS was greater than the expected growth rate of 2021 EPS for the remainder of August and September ’20.
4.) Same with expected revenue growth: 2021’s expected revenue growth was greater than the 2020 percentage decline until April 10th, and then, 2020’s expected percentage decline eclipsed 2021’s expected revenue growth, and the difference has grown since.
The top Financial sector names in the S&P 500 (ranked by market cap):
- Berkshire Hathaway (BRK.A, BRK.B)
- Visa / Mastercard (V/MA)
- JPMorgan (JPM)
- Bank of America (BAC)
- Wells Fargo (WFC)
- Goldman Sachs / Morgan Stanley (GS/MS)
Whether Visa / Mastercard are “financial” stocks is probably worthy of debate, since their core operations are tied to the expansion and contraction of credit usage, primarily in the United States, but some consider them technology (i.e payment networks) and even might even be closer to Fintech.
What’s the point?
Anyone reading this blog is sophisticated enough to know that Financial sector earnings, particularly bank earnings are being impacted by three primary issues:
1.) Expected credit losses at the consumer level,