Third quarter earnings season is upon us. So, for this week’s featured chart, we show the consensus estimates for year-over-year growth in S&P 500 reported earnings per share by calendar year.
The two lines I want to focus on are the light blue and orange dashed lines (calendar years 2022 and 2023, respectively). As the light blue dashed line shows, we started the year with analysts expecting earnings to grow about 10% for the year. But that expectation has trailed off, and analysts are now projecting earnings to fall at a rate of -5.5% for the year.
However, next year (orange dashed line), we see that expectations have remained relatively flat, around 12% or so. This is to be expected as analysts will be hesitant to move their expectations too much, given the high level of near-term uncertainty.
Historically, analysts are an optimistic bunch; hence the reason estimates tend to decline as the year progresses. So, going forward, the key thing to look for is whether a worsening economic environment leads analysts to revise their earnings estimates downward for next year.
Until the market can find its footing, potential earnings revisions should remain on the list of reasons to be cautious.
This is intended for informational purposes only and should not be used as the primary basis for an investment decision. Consult an advisor for your personal situation.
Indices mentioned are unmanaged, do not incur fees, and cannot be invested into directly.
Past performance does not guarantee future results.