Analysts Shrink Projections for First Quarter Earnings Growth

Those nice double-digit results we’ve enjoyed are so 2021, they say.

The big earnings pullback is underway. As reporting season ends for the S&P 500’s fourth quarter 2021, there are already downbeat estimates for this year’s first period—and it still has more than three weeks to run.

FactSet research sees that analysts are trimming their projections for the January-March quarter, predicting that earnings per share will drop by 1.2% (to $51.62 from the previous prediction of $52.22). John Butters, FactSet’s senior earnings analyst, termed that smaller estimate the largest decrease since 2020’s second quarter, when the pandemic’s arrival sent the economy and the market skidding.

In general, analysts expect this year overall to have a higher EPS than all of 2021, just a more muted rise than we’ve seen once stocks and economic growth resumed their expansion last year. Zachs Investment Research thinks that EPS will rise 3.7% this quarter.

That is pretty puny compared with the 29% jump that 4Q21 scored over the comparable timespan from a year earlier.

The villains in the earnings slowdown are newly rapid inflation, expected higher interest rates, worries about the coronavirus, snarled supply chains, and the Ukraine war.

For the first two months of 2022, only three sectors appear to be poised to gain EPS: energy, real estate, and technology.

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