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Have Analysts Lowered Their Ratings on S&P 500 Stocks Due to COVID-19?

Earnings

By John Butters  |  June 19, 2020

With the end of the second quarter approaching, where are analysts most optimistic and pessimistic in terms of their ratings on stocks in the S&P 500? How have their ratings changed given the impact of COVID-19?

Overall, there are 10,382 ratings on stocks in the S&P 500. Of these 10,382 ratings, 52.1% are Buy ratings, 41.6% are Hold ratings, and 6.3% are Sell ratings.

At the sector level, analysts are most optimistic on the Energy (62%) and Health Care (61%) sectors, as these two sectors have the highest percentages of Buy ratings of all 11 sectors. However, the Energy sector is also projected to report the largest earnings decline of all 11 sectors in CY 2020 (-107.6%). On the other hand, analysts are most pessimistic on the Consumer Staples (43%) and Financials (45%) sectors, as these two sectors have the lowest percentages of Buy ratings. The Consumer Staples sector also has the highest percentage of Sell ratings (10%), while the Financials sector also has the highest percentage of Hold ratings (48%).

S&P 500 Percentage of Buy Hold and Sell Ratings

Despite the negative impact on numerous businesses due to the lockdowns caused by COVID-19, the percentage of Buy ratings on S&P 500 stocks has actually increased since the start of the year. On January 3, just over half of all ratings on S&P 500 stocks (50.6%) were Buy ratings. As stock prices and target prices fell in February and March, analysts increased their Buy ratings on S&P 500 stocks, with the percentage peaking at over 54% in early April. As stock prices and target prices have increased over the last few months, the percentage of Buy ratings has dipped slightly. Despite the small decrease, the percentage of Buy ratings on S&P 500 stocks today (52.1%) is above the percentage back on January 3 (50.6%) prior to the lockdowns caused by COVID-19.

S&P 500 Buy Ratings Target Price and Closing Price YTD

However, there has been little change at the sector level in terms of ranking by Buy ratings. The same four sectors that had the highest percentages of Buy ratings at the start of the year also have the highest percentages of Buy ratings today. Three of the four sectors that had the lowest percentages of Buy ratings at the start of the year also have the lowest percentages of Buy ratings today. The Utilities sector is the only sector that has witnessed a significant change in terms of its ranking by Buy ratings (to sixth highest from tenth highest) since the start of the year, as the percentage of Buy ratings in this sector has increased to 51% from 42% during this period.

Month-End S&P 500 Sector Buy Ratings % (Source: FactSet)

Sector

Dec-19

Jan-20

Feb-20

Mar-20

Apr-20

May-20

Jun-20

Communication Services

60%

59%

61%

62%

60%

58%

58%

Consumer Discretionary

48%

48%

48%

50%

49%

50%

49%

Consumer Staples

39%

38%

38%

44%

43%

43%

43%

Energy

66%

66%

67%

66%

63%

62%

62%

Financials

43%

42%

42%

46%

45%

45%

45%

Health Care

59%

59%

59%

62%

60%

60%

61%

Industrials

46%

46%

47%

50%

48%

49%

48%

Information Technology

53%

54%

55%

59%

56%

56%

56%

Materials

50%

50%

49%

55%

53%

52%

52%

Real Estate

44%

44%

46%

49%

47%

47%

48%

Utilities

42%

42%

43%

50%

48%

50%

51%

S&P 500

51%

50%

51%

54%

52%

52%

52%

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

Company

Buy

Hold

Sell

Quanta Services, Inc.

100%

0%

0%

Assurant, Inc.

100%

0%

0%

L3Harris Technologies Inc

95%

5%

0%

Intercontinental Exchange, Inc.

95%

5%

0%

Jacobs Engineering Group Inc.

94%

6%

0%

Synopsys, Inc.

93%

0%

7%

Cigna Corporation

92%

8%

0%

Amazon.com, Inc.

92%

6%

2%

Diamondback Energy, Inc.

92%

8%

0%

Alphabet Inc. Class A

91%

9%

0%

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

Company

Buy

Hold

Sell

McCormick & Company, Incorporated

15%

38%

46%

American Airlines Group, Inc.

20%

35%

45%

CenturyLink, Inc.

19%

38%

44%

Consolidated Edison, Inc.

18%

41%

41%

Waters Corporation

0%

60%

40%

Franklin Resources, Inc.

0%

62%

38%

News Corporation Class A

38%

25%

38%

Western Union Company

5%

62%

33%

ResMed Inc.

44%

22%

33%

Clorox Company

20%

47%

33%

 

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John Butters

Vice President, Senior Earnings Analyst, Investor Relations

Mr. John Butters is Vice President and Senior Earnings Analyst at FactSet. His 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, The Financial Times, The New York Times, MarketWatch, and Yahoo! Finance. Mr. Butters has over 15 years of experience in the financial services industry. Prior to FactSet in January 2011, he worked for more than 10 years at Thomson Reuters (Thomson Financial), most recently as Director of U.S. Earnings Research (2007-2010).

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