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Industry Analysts Project 16% Price Increase for S&P 500 Over the Next 12 Months

Companies and Earnings

By John Butters  |  April 11, 2018

During the first quarter, the S&P 500 index recorded a decrease in value (-1.2%) for the first time since Q3 2015. During the past 12 months (March 31, 2017 to March 31), the S&P 500 recorded an increase in value of 11.8%. 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 16.2% 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 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 the companies in the index. On April 5, the bottom-up target price for the S&P 500 was 3,094.05, which was 16.2% above the closing price of 2,662.84.

SP 500 Bottom Up Target Price

At the sector level, the Health Care (+18.8%), Information Technology (+18.2%), and Energy (+18.0%) 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 5. On the other hand, the Utilities (+4.8%) 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 5.

SP 500 Sector Level Bottom Up Target Price vs Closing Price

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 -0.2%. In other words, industry analysts have underestimated the price of the index 12 months in advance by 0.2% on average during the previous five years (using month-end values).

SP 500 Bottom Up Target Price_12month lag_vs Closing Price

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 11.6%. 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 10.5%. In other words, industry analysts have overestimated the price of the index 12 months in advance by 11.6% on average over the past 10 years (using month-end values) and by 10.5% on average over the past 15 years (using month-end values).

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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.

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