Corporate Earnings Estimates Continue to Improve

By Tom Burnett CFA

 

In the FACTSET report from November 6, 2020, the S/P 500 earnings forecast picture continues to improve.  The consensus estimate for 2020 is now $137.15, much improved from the July  10 forecast of $126.79.  The latest figure represents a decline of 15.9% from the $163.02 reported for the 2019 year, but it is an improvement of 8.7% from the July forecast.  It now appears that the third quarter decline will be 7.5% from the 2019 third quarter, well below the 31.6% decline realized in the June quarter.

The latest forecast for 2021 also improves from earlier estimates. The 2021 forecast is now $168.06, compared to the July 10 estimate of $163.16.  The latest forecast represents an expected gain of 22.6% next year.  This figure, if realized, would be an increase of 3% over the actual 2019 earnings number.  With the Index trading around the 3550 level, the p-e ratio on 2021 earnings would be 21.1x, historically high even in today’s low interest rate environment.

 

Tom Burnett CFA is Director of Research