During the second quarter, the S&P 500 index recorded an increase in value of 2.9%. Ahead of the start of second 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 13.0% 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 (July 5). 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 July 5, the bottom-up target price for the S&P 500 was 3093.12, which was 13.0% above the closing price of 2736.61.
Insight/2018/7.2018/07.09.2018_ToW2/S&P%20500%20Bottom%20Up%20Target%20Price.png)
At the sector level, the Financials (+18.8%), Materials (17.4%), and Industrials (+17.1%) 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 July 5. On the other hand, the Utilities (+2.1%) and Real Estate (3.9%) 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 July 5.
Insight/2018/7.2018/07.09.2018_ToW2/Sector%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 July 5) are listed below.
S&P 500: Difference Between Median Target Price & Closing Price: Top 10 (Source: FactSet)
|
Company |
Target |
Closing |
Diff ($) |
Diff (%) |
|
Nektar Therapeutics |
101.00 |
47.54 |
53.46 |
112.5% |
|
Xerox Corporation |
38.00 |
24.19 |
13.81 |
57.1% |
|
Lam Research Corporation |
262.50 |
171.82 |
90.68 |
52.8% |
|
Micron Technology, Inc. |
80.00 |
52.84 |
27.16 |
51.4% |
|
Jefferies Financial Group Inc. |
34.00 |
22.62 |
11.38 |
50.3% |
|
Western Digital Corporation |
115.00 |
77.46 |
37.54 |
48.5% |
|
Norwegian Cruise Line Holdings |
67.00 |
46.62 |
20.38 |
43.7% |
|
Applied Materials, Inc. |
65.00 |
45.44 |
19.56 |
43.0% |
|
Affiliated Managers Group, Inc. |
210.00 |
148.02 |
61.98 |
41.9% |
|
American Airlines Group, Inc. |
53.50 |
37.99 |
15.51 |
40.8% |
S&P 500: Difference Between Median Target Price & Closing Price: Bottom 10 (Source: FactSet)
|
Company |
Target |
Closing |
Diff ($) |
Diff (%) |
|
Twitter, Inc. |
32.00 |
45.06 |
-13.06 |
-29.0% |
|
Under Armour, Inc. Class A |
16.00 |
22.07 |
-6.07 |
-27.5% |
|
Under Armour, Inc. Class C |
16.00 |
20.75 |
-4.75 |
-22.9% |
|
Campbell Soup Company |
34.00 |
41.49 |
-7.49 |
-18.1% |
|
TripAdvisor, Inc. |
48.00 |
56.91 |
-8.91 |
-15.7% |
|
National Oilwell Varco, Inc. |
37.50 |
43.58 |
-6.08 |
-14.0% |
|
Advanced Micro Devices, Inc. |
13.50 |
15.50 |
-2.00 |
-12.9% |
|
VeriSign, Inc. |
123.00 |
140.99 |
-17.99 |
-12.8% |
|
Cintas Corporation |
167.00 |
189.40 |
-22.40 |
-11.8% |
|
Public Storage |
207.50 |
232.71 |
-25.21 |
-10.8% |
How accurate have the 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 10.9%. 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 9.7%. In other words, industry analysts have overestimated the price of the index 12 months in advance by 10.9% on average over the past 10 years (using month-end values) and by 9.7% on average over the past 15 years (using month-end values).
Insight/2018/7.2018/07.09.2018_ToW2/Bottom%20Up%20Target%20Price%20vs%20Closing%20Price.png)
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).
More S&P 500 Companies Issuing Negative EPS Guidance for Q1 Than Average
Overall, 107 S&P 500 companies have issued quarterly EPS guidance for the first quarter.
Industry Analysts Project 21% Increase in S&P 500 Price Over the Next 12 Months
At the sector level, the Information Technology (+30.4%), Consumer Discretionary (+27.0%), and Communication Services (+25.1%)...
Where Are Analysts Most Optimistic on Ratings for S&P 500 Companies Heading into Q2?
With the start of the second quarter approaching, where are analysts most optimistic and pessimistic in terms of their ratings on...
Are Fewer S&P 500 Companies Citing “Inflation” on Earnings Calls for Q4?
Among S&P 500 companies that conducted earnings conference calls from December 15 through March 14, 230 cited the term...
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.
Post Comment
