Analysts Predict US Earnings to Jump 19.7% in 2017

24.10.2016 • Gold and Natural Resources

By Kris Sayce – Port Phillip Insider (Australia) –

Good news from the Financial Times:

Earnings of companies listed on the S&P 500 index are expected to rise by 0.63 per cent from the same period in 2015 — not exactly a dazzling rise, but still an improvement from the 1 per cent decline that was projected before the earnings jamboree kicked off.

We say good news, although it flies in the face of your editor’s claims of an impending recession.

It also flies in the face of the chart we’ve shown you time and again over the past year. You know the one. If you don’t, because you’ve either forgotten or it’s the first time you’ve seen it, here it is again:


chart image

Source: Bloomberg
Click to enlarge

The chart shows historical and forecast earnings for companies in the US S&P 500 index.

The white line to the left of the green line shows historic earnings. The white line to the right of the green line shows forecast earnings.

The important thing to note is that earnings have declined since the end of 2014. Yet the forecasts continue to represent growing earnings.

Not just a small earnings increase, either. For S&P 500 companies to meet analysts’ forecasts, earnings will have to grow 19.7% over the coming year.

Is that possible? Sure, anything is possible. Is it probable? Not in our view. Not when, as the FT notes, earnings are on track to rise 0.63% compared to the same period last year.

In other words, if earnings per share are to increase by 19.7% over the next year, growth will have to be 30-times greater than the growth for the current quarter.

You get our point. We don’t see it happening.

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