Uddrag fra Wellsfargo:
Coming into this year, our estimate for S&P 500 earnings was $175 per share, representing an approximate 7% gain over 2019’s results. But then the COVID-19 pandemic took center stage as much of the U.S. economy shut down and millions of workers lost their jobs. Economies were hit around the globe as the virus’ spread accelerated in March.
Given the magnitude of the economic stumble that was unfolding, it was clear our initial estimate was still meaningfully too high. We took this year’s estimate down to $115 on March 27. That represented a 30% decline versus last year’s results.
But the actual earnings results from the first half of this year have lessened the gloom to some extent. First-quarter results were better-than-expected. Then, coming into the second-quarter reporting season, earnings were expected to be down 40% to 45% versus the year-ago period, a dismal result no matter how you slice it.
But based on the reporting season thus far with 90% of the companies in the S&P 500 reporting, earnings have declined “only” 35% (less bad). North of 83% of companies reporting have beat the consensus estimate. Still, only three of 11 sectors have posted positive year-over-year gains. First-quarter results also came in better than expected (less bad, again). The good news is our current estimate for this year appears to be too low.
Of course, upside earnings surprises also frequently result from macroeconomic news coming in better than expected, which has certainly been the case in the U.S. Economic surprise indices, which measure how actual economic reports come in relative to consensus estimates, have surged to levels far exceeding any reading in the current Bloomberg data we have access to going back to January 2003. So while many economic indicators are still reflecting harsh economic pandemic-related realities, in aggregate, the readings are not nearly as dire as the average economist expected.
Based on the first half of this year’s better-than-expected results, our earnings estimate is moving up to $125 versus the previously mentioned $115. The second half of the year should produce much better year-over-year comparisons as we expect the economies here at home and abroad to further open as headwinds from the pandemic continue to ease. Our gross domestic product (GDP) forecasts for the third and fourth quarters reflect growth rather than the contraction seen in the first half of this year.
While a number of potential risks remain, better corporate results so far this year and expected economic growth in the second half have led to an upside earnings estimate adjustment for 2020
