Stalling Profit Projections Are Creating A Headache For Stocks

Stalling Profit Projections Are Creating A Headache For Stocks
Andrew Rummer

almost 3 years ago1 min

Mentioned in story

After climbing steadily since the start of the year, analysts’ profit estimates for companies in the S&P 500 have plateaued in recent weeks – creating a potential drag on further stock market gains. 

As the chart above shows, per-share profit projections have been on a wild ride since coronavirus struck in early 2020. Analysts cut their forecasts dramatically, before gradually bringing them back up as the pandemic abated.

But while US profit projections are roughly where they were before the crisis, however, the S&P 500 is more than 20% higher. 

For stocks to climb further from here, therefore, either companies will have to exceed analysts’ expectations when they report first-quarter results after Easter – or investors will need to pay ever higher valuation multiples for their stocks.

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