SPX EPS for 21Q1 is strongly beating consensus expectations and is higher than our more optimistic “Surprise Catch-up” (SC) model projections. As a result, while consensus for CY21 EPS increased from $176 to $187, our SC model projection for 2021 EPS further increased from $196 to $207 (official Barclays’ forecast remains $190).  The beat was driven by FANMAG and Financials. However, the EPS surprise seems priced in as SPX returns were flat during the second half of the month. There was a consolidation in names with high exposure to the cyclical recovery trade (Value, Cyclicals, negative Covid exposure) during the month, while names that outperformed early in the pandemic (Growth, FANMAG) bounced up. 

SPX EPS surprise near all-time highs, our FY21 SC Model EPS projection rises. With ~75% of companies reporting, SPX EPS surprise for 21Q1 is at ~23% ($47.1), above both consensus ($39.7) and our “Surprise Catch-Up” (SC) Model ($43.7). Most the surprise has been driven by sectors where our SC model was most optimistic (FINL, FANMAG) as opposed to more defensive sectors, implying that consensus was not properly incorporating prior EPS surprise. Similar to what happened in the past few quarters, while future quarters have been modestly revised up, the consensus QoQ Growth projection for 21Q2 is now negative (-7.1%), which we believe is unlikely. Consensus expectations for FY21 increased from $176 to $187. Given 21Q1 was stronger than our SC model its FY21 projections further increased from $196 to $207.