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After Record Close, Industry Analysts Still Predict an 8% Increase in Value for the S&P 500

Earnings

By John Butters  |  July 3, 2019

On July 2, the closing price for the S&P 500 was 2973.01, which was a record high for the index. Where do industry analysts believe the price of the index will go from here?

Industry analysts in aggregate predict the S&P 500 will see an 8.3% increase in price over the next 12 months. This percentage is based on the difference between the bottom-up target price and the closing price for the index as of yesterday (July 2). The bottom-up target price is calculated by aggregating the median target price estimates (based on company-level estimates submitted by industry analysts) for all the companies in the index. On July 2, the bottom-up target price for the S&P 500 was 3218.78, which was 8.3% above the closing price of 2973.01.

Bottom Up Target Price

At the sector level, the Energy (+19.9%) sector is expected to see the largest price increase, as this sector had the largest upside difference between the bottom-up target price and the closing price on July 2. On the other hand, the Utilities (+2.0%) and Real Estate (+2.1%) sectors are expected to see the smallest price increases, as these sectors had the smallest upside differences between the bottom-up target price and the closing price on July 2.

Sector Bottom Up

At the company level, the ten stocks in the S&P 500 with the largest upside and downside differences between their median target price and closing price (on July 2) can be found on the next page.

How accurate have the industry analysts been in predicting the future value of the S&P 500?

Analysts have typically overestimated the future closing price of the S&P 500. Over the past 5 years, the average difference between the bottom-up target price estimate at the end of the month and the closing price 12 months later has been 2.2%. Over the past 10 years, the average difference between the bottom-up target price estimate at the end of the month and the closing price 12 months later has been 3.3%. Over the past 15 years, the average difference between the bottom-up target price estimate at the end of the month and the closing price 12 months later has been 9.8%. In other words, industry analysts have overestimated the price of the index by 2.2% on average over the past five years (using month-end values), by 3.3% on average over the past 10 years, and by 9.8% on average over the past 15 years.

 

 

S&P 500: Difference Between Median Target Price & Closing Price: Top 10 (Source: FactSet)

Company

Target

Closing

Diff ($)

Diff (%)

Nektar Therapeutics

69.00

36.13

32.87

91.0%

Halliburton Company

36.00

22.65

13.35

58.9%

Marathon Oil Corporation

21.00

13.55

7.45

55.0%

Jefferies Financial Group Inc.

30.00

19.47

10.53

54.1%

Concho Resources Inc.

149.00

98.97

50.03

50.6%

Foot Locker, Inc.

60.00

40.61

19.39

47.7%

Marathon Petroleum Corporation

80.00

54.49

25.51

46.8%

Noble Energy, Inc.

32.00

21.80

10.20

46.8%

Diamondback Energy, Inc.

151.00

104.17

46.83

45.0%

Mylan N.V.

28.00

19.35

8.65

44.7%

 

S&P 500: Difference Between Median Target Price & Closing Price: Bottom 10 (Source: FactSet)

Company

Target

Closing

Diff ($)

Diff (%)

MarketAxess Holdings Inc.

245.00

330.89

-85.89

-26.0%

DISH Network Corporation Cl A

33.50

39.17

-5.67

-14.5%

Cincinnati Financial Corporation

92.00

105.41

-13.41

-12.7%

Mettler-Toledo International Inc.

750.00

853.30

-103.30

-12.1%

Public Storage

215.00

242.51

-27.51

-11.3%

Total System Services, Inc.

115.50

130.27

-14.77

-11.3%

Hershey Company

122.00

136.09

-14.09

-10.4%

Hormel Foods Corporation

37.00

41.20

-4.20

-10.2%

Under Armour, Inc. Class A

23.00

25.53

-2.53

-9.9%

Aflac Incorporated

51.00

56.21

-5.21

-9.3%

Download the latest Earnings Insight

John Butters

Senior Earnings Analyst

John’s weekly research report, Earnings Insight provides analysis and commentary on trends in corporate earnings data for the S&P 500, including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, Financial Times, The New York Times, MarketWatch, and Yahoo! Finance.

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