From February 19 to March 23, the value of the S&P 500 decreased by 34% (to 2237.40 from 3386.15). Since March 23, the value of the S&P 500 has increased by 23% (to 2749.98 from 2237.40). 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 17.8% 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 April 8. 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 April 8, the bottom-up target price for the S&P 500 was 3238.62, which was 17.8% above the closing price of 2749.98.
Insight/2020/04.2020/04.09.2020_EI/S%26P%20500%20Bottom%20Up%20Target%20Price%20vs%20Closing%20Price.png)
At the sector level, the Communication Services (+23.3%) and Financials (+23.3%) sectors are expected to see the largest price increases, as these sectors had the largest upside differences between the bottom-up target price and the closing price on April 8. On the other hand, the Consumer Staples (+11.2%) sector is expected to see the smallest price increase, as this sector had the smallest upside difference between the bottom-up target price and the closing price on April 8.
Insight/2020/04.2020/04.09.2020_EI/S%26P%20500%20Sector%20Level%20Bottom%20Up%20Target%20Price%20vs%20Closing%20Price.png)
At the company level, the 10 stocks in the S&P 500 with the largest upside and downside differences between their median target price and closing price (on April 8) can be found in the tables below.
|
Company |
Target |
Closing |
Diff ($) |
Diff (%) |
|
Norwegian Cruise Line Holdings |
30.00 |
11.72 |
18.28 |
156.0% |
|
Carnival Corporation |
30.50 |
11.99 |
18.51 |
154.4% |
|
DXC Technology Co. |
35.00 |
15.80 |
19.20 |
121.5% |
|
MGM Resorts International |
31.00 |
15.00 |
16.00 |
106.7% |
|
American International Group |
49.50 |
24.13 |
25.37 |
105.1% |
|
Kimco Realty Corporation |
19.50 |
9.63 |
9.87 |
102.5% |
|
Simon Property Group, Inc. |
125.00 |
62.91 |
62.09 |
98.7% |
|
Marathon Petroleum Corporation |
46.00 |
24.31 |
21.69 |
89.2% |
|
Xerox Holdings Corporation |
36.00 |
19.26 |
16.74 |
86.9% |
|
United Airlines Holdings, Inc. |
51.00 |
27.51 |
23.49 |
85.4% |
|
Company |
Target |
Closing |
Diff ($) |
Diff (%) |
|
Occidental Petroleum Corporation |
13.00 |
15.56 |
-2.56 |
-16.5% |
|
Clorox Company |
162.00 |
181.04 |
-19.04 |
-10.5% |
|
MarketAxess Holdings Inc. |
356.50 |
395.62 |
-39.12 |
-9.9% |
|
Illinois Tool Works Inc. |
145.00 |
158.80 |
-13.80 |
-8.7% |
|
McCormick & Company, Inc. |
136.50 |
149.10 |
-12.60 |
-8.5% |
|
Hormel Foods Corporation |
43.50 |
47.37 |
-3.87 |
-8.2% |
|
Citrix Systems, Inc. |
135.00 |
146.82 |
-11.82 |
-8.1% |
|
Waters Corporation |
182.50 |
196.08 |
-13.58 |
-6.9% |
|
Brown-Forman Corporation Cl. B |
57.50 |
61.22 |
-3.72 |
-6.1% |
|
Jack Henry & Associates, Inc. |
161.50 |
169.38 |
-7.88 |
-4.7% |
How accurate have the industry analysts been in predicting the future value of the S&P 500? Industry analysts have overestimated the price of the index by 3.3% on average over the past five years (using month-end values), by 2.3% on average over the past 10 years, and by 9.8% on average over the past 15 years.
However, it is important to note that the bottom-up target price has declined by 11.3% since peaking at 3649.25 on February 26. It will be interesting to see if analysts continue to revise their target prices lower as S&P 500 companies report actual results for Q1 over the next few weeks. While industry analysts in aggregate are calling for a year-over-year decline in earnings for CY 2020 (-8.5%), they are also calling for double-digit growth in earnings in CY 2021 (+18.2%).
Insight/Author%20Bios/JohnButters2.jpg)
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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The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.
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