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For the second quarter to date, the S&P 500 index has recorded an increase in value of 2.4% (to 2419.70 from 2362.72). Over the past year (since June 30, 2016), the S&P 500 index has witnessed an increase in value of 15.3% (to 2419.70 from 2098.86). Where do industry analysts believe the price of the index will go from here?

S&P-Bottom-up-target-price.png

Industry analysts in aggregate predict the S&P 500 will see a 9.3% 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. 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 June 29, the bottom-up target price for the S&P 500 was 2645.58, which was 9.3% above the closing price of 2419.38.

Sector Breakdown

At the sector-level, the Energy sector has the largest upside difference between the bottom-up target price and the closing price (+21.1%), while the Utilities sector has the smallest upside difference between the bottom-up target price and the closing price (+3.7%). 

S&P-bottom-up-vs-sector price.png

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

At the index level one year ago (June 30, 2016), the bottom-up target price was 2327.66. Compared to the most recent closing price of 2419.70 on June 29, 2017, industry analysts underestimated the price of the index by about 3.8% one year ago. The final percentage will depend on today’s closing price. Over the past 12 months (June 2016 to May 2017), industry analysts on average have overestimated the final price of the index at the end of each month by 3.8%. Over the prior 60 months (June 2012 to May 2017), industry analysts on average have overestimated the final price of the index at the end of each month by 2.0%.

At the sector level one year-ago (June 30, 2016), the Materials (+18.9%), Information Technology (+16.6%), and Consumer Discretionary (+15.0%) sectors had the largest upside percentage differences between the bottom-up target price and the closing price in the index. Since June 30, 2016, the Financials (+32.9%), Information Technology (+32.0%), and Industrials (+18.7%) sectors have recorded the highest price returns in the index. On the other hand, the Telecom Services (-3.9%), Utilities (-3.5%), and Energy (+3.0%) sectors had the largest downside (or smallest upside) percentage differences between the bottom-up price target and closing price in the index one year ago. Since June 30, 2016, the Telecom Services (-15.9%), Energy (-7.1%), and Real Estate (-3.7%) sectors have recorded the lowest price returns in the index.

Company Breakdown

At the company level, the S&P 500 can be divided into five quintiles based on the percentage difference between the median target price and the closing price on June 30, 2016 to analyze price performance.

The quintile with the highest positive percentage difference between the median target price and the closing price on June 30, 2016 (Quintile 1) has seen the highest average (+28.1%) and median (+31.6%) price increase of all five quintiles since June 30, 2016. The quintile with the highest negative percentage difference between the median target price and the closing price on June 30, 2016 has seen the lowest average (+3.4%) and median (+1.0%) price increase of all five quintiles since June 30, 2016. Price returns for companies in the index that were acquired or no longer traded publicly after June 30, 2016 (i.e. do not have a current trading price) were excluded from the price analysis for the quintiles.

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

Company

Target

Closing

Diff ($)

Diff (%)

Anadarko Petroleum Corporation

77.00

45.25

31.75

70.2%

Range Resources Corporation

38.00

23.59

14.41

61.1%

Marathon Oil Corporation

18.50

11.71

6.79

58.0%

Mallinckrodt Plc

70.00

44.41

25.59

57.6%

Newfield Exploration Company

45.00

28.60

16.40

57.3%

Devon Energy Corporation

49.00

31.81

17.19

54.0%

Cimarex Energy Co.

142.00

94.25

47.75

50.7%

Foot Locker, Inc.

71.00

48.70

22.30

45.8%

Transocean Ltd.

12.00

8.31

3.69

44.4%

Halliburton Company

61.00

42.42

18.58

43.8%

 

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

Company

Target

Closing

Diff ($)

Diff (%)

NVIDIA Corporation

127.50

146.68

-19.18

-13.1%

Varian Medical Systems, Inc.

91.50

102.68

-11.18

-10.9%

Mettler-Toledo International Inc.

527.00

583.87

-56.87

-9.7%

Patterson Companies, Inc.

43.25

47.59

-4.34

-9.1%

Advanced Micro Devices, Inc.

11.50

12.60

-1.10

-8.7%

Ventas, Inc.

64.00

69.21

-5.21

-7.5%

Hasbro, Inc.

102.00

110.06

-8.06

-7.3%

3M Company

193.00

207.85

-14.85

-7.1%

Intuitive Surgical, Inc.

870.00

930.50

-60.50

-6.5%

Assurant, Inc.

97.50

104.20

-6.70

-6.4%

 

 

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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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