By Tom Burnett CFA
In its most recent release (April 3, 2020), FACTSET indicates that consensus earnings estimates for the S/P 500 companies are coming down rapidly. As many companies withdraw “guidance” and explain the negative impact of the coronavirus outbreak on their operations, analysts are quickly reducing their forecasts for the 2020 year. At the end of last year, analysts were expecting first quarter 2020 earnings for the S/P 500 companies to rise by 4.3% (FACTSET). They now expect first quarter results to be DOWN by more than 7.0% which would be the worst quarterly performance since Q3 of 2009.
For the full 2020-year, consensus estimates for the S/P 500 now center around $159, down from $163 in 2019. The $159 forecast is down sharply from the $176 level projected in the February 21, 2020 FACTSET report. As companies report their first quarter results over the next two weeks, full-year estimates are expected to continue declining. With the 500 Index at 2,680, the 2020 earnings multiple is a rich 16.8x figure which will expand as earnings estimates continue to go lower.