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