Earnings revisions by analysts have been front of mind, specifically when attempting to ascertain expectations for valuations and overall return.
This chart exhibits the trend in analysts’ one-month earnings revisions, which has been fluctuating throughout the first half of 2022. Analyst revisions have trended downward throughout the first half of 2022. This phenomena has continued into the current quarter and beyond.
With the third quarter reporting season just around the corner, analysts have been active in revising their estimates. According to Refinitiv IBES, for the S&P 500 analysts are estimating year-over-year (YOY) growth in earnings for the third-quarter of 5.1%, materially below the 11.1% estimated as of the beginning of the quarter. Likewise, for the fourth quarter analysts are estimating earnings will grow 6.3% YOY versus 10.6% as of the beginning of the quarter.
Looking out over the next 12 months, downward revisions currently outpace upward revision 62% to 38%, a trend which has been in place for much of this third quarter. The result, analysts are estimating earnings growth YOY of 7.9% for all of 2022 and 8.0% for 2024, down from 9.5% and 9.3% as of the beginning of the quarter.