S&P 500 Index Earnings & Revenue Growth Rate Projections

View from the Observation Deck  
  1. On 9/25/19, the S&P 500 Index closed the trading session at 2,984.87, 1.35% below its all-time high of 3,025.86 (7/26/19), according to Bloomberg. 
  2. For the market to trend higher, we believe that corporate earnings will need to grow, and perhaps the best catalyst for growing earnings is to increase revenues.
  3. From 1926-2018 (93 years), the S&P 500 Index posted an average annual total return of 9.99%, according to Morningstar/Ibbotson & Associates. 
  4. As indicated in the table, Bloomberg's 2019 and 2020 consensus year-over-year (y-o-y) earnings growth rate estimates for the index were 2.5% and 10.0%, respectively, as of 9/20/19. 
  5. Only one (Communication Services) of the 11 major sectors that comprise the index reflects a positive double-digit y-o-y earnings growth rate estimate for 2019, compared to five in 2020. 
  6. Bloomberg's 2019 and 2020 consensus y-o-y revenue growth rate estimates for the S&P 500 Index were 3.9% and 5.0%, respectively, as of 9/20/19.
  7. Three of the 11 major sectors reflect y-o-y revenue growth rate estimates of 5.0% or more for 2019, compared to six for 2020.
  8. While consensus y-o-y earnings growth rate estimates for the S&P 500 Index are negative for Q3'19 and soft for Q4'19, the outlook for 2020 is encouraging. The following is a breakdown of those quarterly estimates through 2020 (not in table): -3.3% (Q3'19); 3.4% (Q4'19); 6.5% (Q1'20); 7.2% (Q2'20); 13.1% (Q3'20); and 12.5% (Q4'20), according to Bloomberg. 
This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. The 11 major S&P 500 Sector Indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector. 

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Posted on Thursday, September 26, 2019 @ 1:29 PM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.