While no major earnings release planned for next week, U.S. President Joe Biden’s massive infrastructure plan and first-quarter earnings season, which kicks off in the second week of this month with a strong growth return, is expected to see stocks soar will drift.
The benchmark S&P 500 surged above 4,000 for the first time on Thursday as President Biden’s newly proposed $ 2.25 trillion spending plan fueled optimism about the country’s general economic outlook.
Equity analysts remain optimistic about the first quarter results, which companies will report on from mid-April COVID-19 The adoption of vaccines is accelerating and improving the global economic outlook.
“The general picture of the result continues to improve. We assume that this trend will accelerate in the summer months and that there will be signs of a strong economic recovery. The overall result for the first quarter of 2021 is currently expected to increase by + 19.9% compared to the same period of the previous year, which corresponds to an increase in sales of + 5.6%. A combination of simple comparisons and strong growth in a number of sectors ensures a recovery in growth, ”said the analysts at ZACKS Research.
“Sectors with positive earnings growth in the first quarter include: finance (+ 45.9% earnings growth), technology (+ 23.0%), automobiles (+ 200.9%), retail (+ 41.4%), medical (+ 16.5%), basic materials (+ 66.4%), construction (+ 36.8%), industrial products (+ 22.9%), utilities (+ 3.1%) and consumer staples (+ 1.9 %). “
Consumer Finance leads first quarter 21 earnings season
Consumer finance is likely to be the star of the first quarter earnings season, which analysts said will hit the market the following week Morgan Stanley who expect it to light a fire under the camp.
“The results for the first quarter of 21 will be full of good news. Our reopened trading stocks are best positioned: Synchrony Financial (SYF), Capital One Financial (COF), Alliance Data Systems (ADS). The quarter should include details on improving consumer spending, an above-expected reserve release, and prospects for higher buybacks. Value rotation is a plus for SEIC too, ”said Betsy L. Graseck, Morgan Stanley equity analyst.
SynchronicityThe company, which will announce its financial results for the first quarter of 2021 on April 27, 2021, is expected to post earnings per share of 1.29, up over 122% year over year of $ 0.58 per share Same quarter of the previous year. For the last four quarters in a row, the company has averaged an earnings surprise of 14%.
“Synchronicity is one of the most heavily indebted banks to reduce unemployment and improve vaccination trends as it has the highest level of excess capital + reserves in our cover at 20% of market capitalization that should come back through in the form of increasing buybacks. Morgan Stanley’s Graseck added.
In fact, we expect buybacks of $ 2.8 billion in 2021 and $ 2.8 billion in 2022, or 70% / 45% above consensus expectations. 2) The valuation is convincing as the Forward 2023 PE trading at ~ 6x versus ~ 7x is a full turnaround below consumer finance peers. We expect an uptrend of 33% from our price target of $ 54 based on an EPS of 9x 2023e of $ 6.61 that was reduced by 10% 1 year. “
Capital One Financial, which will announce its financial results for the first quarter of 2021 on April 27, 2021, is expected to report earnings per share of 4.30, after -3.06 per share in the prior-year quarter.
Alliance data systems is expected to report earnings per share of 4.30, after -3.06 per share in the same quarter of the previous year.
“These stocks are cheap at 7 times our normalized 2023 EPS. Catalysts abound in accelerated post-vaccination mobility (baking bread in valuation), and the Fed recently announced that buybacks may increase in 2H21 (Fed lifts withdrawal restrictions, putting bank boards back in charge of withdrawals), ”added Graseck from Morgan Stanley added.
“Expect management to discuss strong and accelerated consumer spending, accelerated reserve releases, and accelerated buybacks. We’re entering the quarter 4%, 13%, and 5% above consensus for Q1 21 for SYF, COF and ADS. Expect the direction of travel to be in the direction of our bull case as loans come in faster. To the SYF and COFBy accelerating the buybacks, the direction of travel is shifting in the direction of our bull case. “
This items was originally published on FX Empire