Featured Image

Industry Analysts Project 10% Price Increase for S&P 500 Over the Next 12 Months

By John Butters  |  October 8, 2018

During the third quarter, the S&P 500 index recorded an increase in value of 7.2%. Ahead of the start of third quarter earnings season, 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 a 10.5% 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 (October 4). 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 of the companies in the index. On October 4, the bottom-up target price for the S&P 500 was 3205.51, which was 10.5% above the closing price of 2901.61.

SP500 Bottom Up Target Price Vs Closing Price

SP 500 Bottom Up Target Price

At the sector level, the Materials (+16.2%) and Communication Services (14.6%) 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 October 4. On the other hand, the Utilities (+5.1%) and Health Care (+5.9%) 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 October 4.

Sector-Level Bottom Up EPS Targets

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 October 4) are listed below.

S&P 500: Difference Between Median Target Price & Closing Price: Top 10 

Company

Target

Closing

Diff ($)

Diff (%)

Western Digital Corporation

96.00

56.61

39.39

69.6%

Nektar Therapeutics

86.00

52.11

33.89

65.0%

Applied Materials, Inc.

62.50

37.89

24.61

65.0%

Micron Technology, Inc.

69.50

44.16

25.34

57.4%

Microchip Technology Inc.

112.00

71.43

40.57

56.8%

Lam Research Corporation

225.00

149.01

75.99

51.0%

Wynn Resorts, Limited

181.50

123.44

58.06

47.0%

EQT Corporation

65.00

44.23

20.77

47.0%

LKQ Corporation

43.00

30.34

12.66

41.7%

WestRock Co.

73.00

51.59

21.41

41.5%

Source: FactSet 

       

S&P 500: Difference Between Median Target Price & Closing Price: Bottom 10 

Company

Target

Closing

Diff ($)

Diff (%)

Advanced Micro Devices, Inc.

24.00

27.78

-3.78

-13.6%

Flowserve Corporation

48.50

54.49

-5.99

-11.0%

Hormel Foods Corporation

35.50

39.59

-4.09

-10.3%

Juniper Networks, Inc.

26.50

29.37

-2.87

-9.8%

CF Industries Holdings, Inc.

51.00

56.06

-5.06

-9.0%

Henry Schein, Inc.

80.00

87.25

-7.25

-8.3%

Garmin Ltd.

63.50

69.14

-5.64

-8.2%

McCormick & Company, Inc.

125.00

135.71

-10.71

-7.9%

Clorox Company

137.00

146.58

-9.58

-6.5%

Discovery, Inc. Class A

31.00

33.15

-2.15

-6.5%

Source: FactSet 

       

How Accurate Have Industry Analysts Been In Predicting the Future Value of the S&P 500?

Over the past five 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 -0.3%. In other words, industry analysts have underestimated the price of the index 12 months in advance by 0.3% on average during the previous five years (using month-end values). 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 9.7%. 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 9.3%. In other words, industry analysts have overestimated the price of the index 12 months in advance by 9.7% on average over the past 10 years (using month-end values) and by 9.3% on average over the past 15 years.

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.

Comments

Info

We use cookies to personalize content and ads and to analyze our traffic.

We also share information about your use of our site with our advertising and analytics partners. See details.