US earnings powered ahead as the economy emerges from the ashes of the COVID-19 pandemic. Consensus is expecting US earnings growth of 48.1% this year, driven by 9.6% top-line growth and 4.3 % EBITDA margin expansion. Dylan Cheang, Strategist at DBS Bank, sees limited room for valuation multiple expansion this year and believes further upside for S&P 500 is set to be driven by earnings growth. “The strong set of results warrants the case for upward earnings revisions in coming months. At present, market consensus is expecting US earnings to grow 48.1% in 2021 – underpinned byTop-line revenue growth of 9.6% and EBITDA margin expansion of 4.3% to 21.3%. Given the strong earnings beat in 1Q21, we believe that further upgrades are on the cards. “There is strong likelihood that analysts’ earnings forecast for 2021 is skewed to the conservative side – for two reasons: (a) The consensus price target for S&P 500 is 4,130 and this level has already been breached, (b) The ratio for consensus price target over actual market prices for S&P 500 is below the long-term average. Given that consensus forecasts are currently not in the ‘exuberance’ stage, the likelihood of further upgrades is high as the economic recovery gathers pace.” “With the S&P 500 trading at 23x forward price-to-earnings (P/E), there is limited room for further multiple expansion this year. Instead, further upside for US equities has to be driven by earnings growth and the strong 1Q21 numbers augur well for the outlook.”