Analysts Continue to Have An Unusually High Number of “Buy” Ratings on S&P 500 Stocks

Despite higher inflation, rising interest rates, military conflict in Ukraine, fear of recession, and stock price declines, analysts continue to have an unusually high number of Buy ratings on stocks in the S&P 500.

As of today, there are 10,708 ratings on stocks in the S&P 500. Of these ratings, 56.9% are Buy ratings, 37.7% are Hold ratings, and 5.4% are Sell ratings. The five-year average (month-end) percentage of Buy ratings is 53.3%, the five-year average (month-end) percentage of Hold ratings is 40.7%, and the five-year average (month-end) percentage of Sell ratings is 5.5%.

The percentage of Buy ratings has declined slightly in recent months from a peak of 57.4% at the end of February to 56.9% today. However, assuming the percentage of Buy ratings does not dip below 56% in the next two weeks, the month of June will mark the 15^th straight month in which the percentage of Buy ratings on S&P 500 stocks finishes above 56%. Prior to this recent surge in Buy ratings, the last time the (month-end) percentage of Buy ratings exceeded 55% was September 2011 (55.8%).

Sector Analysis

At the sector level, analysts are most optimistic on the Information Technology (65%), Energy (64%), and Communication Services (61%) sectors, as these three sectors have the highest percentages of Buy ratings. On the other hand, analysts are most pessimistic on the Consumer Staples (39%) sector, as this sector has the lowest percentages of Buy ratings. The Consumer Staples sector also has the highest percentage of Hold ratings (49%) and the highest percentage of Sell ratings (12%).

The S&P 500 companies with the highest percentages of Buy and Sell ratings are listed in the tables below.

Highest % of Buy Ratings in S&P 500: Top 10 (Source: FactSet)

Highest % of Sell Ratings in S&P 500: Top 10 (Source: FactSet)

What is driving the optimistic outlook in terms of ratings? One possible reason is that analysts have continued to increase earnings estimates for S&P 500 companies in aggregate for CY 2022 and CY 2023 in recent months.

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