Streetwise: As earnings season gets under way, two things stand out: how much the earnings improvement has mattered this year and how little disappointing earnings mattered in the past few years
Look at Wall Street forecasts, and the pandemic increasingly seems like little more than a lost year. Predictions for S&P 500 earnings per share this year are almost back up to where they stood at the start of March 2020, before the reality of Covid-19 put red lines through everyone’s outlook., two things stand out: just how much the earnings improvement has mattered this year and just how little disappointing earnings have mattered in the past few years.
Start with this year. Operating earnings for 2021 are expected to come in 14% higher than analysts were forecasting at the start of January, and the S&P is up 16%. Higher 2021 profits seem to explain higher stock prices almost perfectly.. Earnings are still predicted to be lower this year than they were forecast to be in February 2019, when Refinitiv began collecting the Wall Street average for 2021.
Why do earnings matter this year when investors paid so little attention to them in the past? The answer has three parts.
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