For the third quarter to date, the S&P 500 index has recorded an increase in value of 3.6% (to 2510.06 from 2423.41). Over the past year (since September 30, 2016), the S&P 500 index has witnessed an increase in value of 15.8% (to 2510.06 from 2168.27). 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 8.4% 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. 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 September 28, the bottom-up target price for the S&P 500 was 2721.60, which was 8.4% above the closing price of 2510.06.
At the sector level, the Consumer Discretionary (+13.1%) and Information Technology (+11.6%) sectors have the largest upside difference between the bottom-up target price and the closing price, while the Telecom Services (+4.2%), Financials (+4.5%), and Utilities (+4.5%) sectors have the smallest upside differences between the bottom-up target price and the closing price.
How have analysts performed in terms of their target price estimates over the past 12 months?
At the index level one year ago (September 30, 2016), the bottom-up target price was 2401.24. Compared to the most recent closing price of 2510.06 on September 28, 2017, industry analysts underestimated the price of the index by about 4.3% one year ago.
S&P 500: Difference Between Median Target Price & Closing Price: Top 10 (Source: FactSet)
|
Company |
Target |
Closing |
Diff ($) |
Diff (%) |
|
Envision Healthcare Corp. |
70.00 |
44.00 |
26.00 |
59.1% |
|
Mattel, Inc. |
22.00 |
15.01 |
6.99 |
46.6% |
|
Range Resources Corporation |
28.00 |
19.72 |
8.28 |
42.0% |
|
Twenty-First Century Fox, Inc. Cl B |
36.00 |
26.01 |
9.99 |
38.4% |
|
Western Digital Corporation |
120.00 |
86.71 |
33.29 |
38.4% |
|
Mylan N.V. |
42.50 |
30.86 |
11.64 |
37.7% |
|
Viacom Inc. Class B |
38.00 |
27.85 |
10.15 |
36.4% |
|
Newell Brands Inc |
57.00 |
41.95 |
15.05 |
35.9% |
|
CBS Corporation Class B |
76.00 |
56.92 |
19.08 |
33.5% |
|
Twenty-First Century Fox, Inc. Cl A |
35.00 |
26.56 |
8.44 |
31.8% |
S&P 500: Difference Between Median Target Price & Closing Price: Bottom 10 (Source: FactSet)
|
Company |
Target |
Closing |
Diff ($) |
Diff (%) |
|
CF Industries Holdings, Inc. |
30.00 |
34.84 |
-4.84 |
-13.9% |
|
Gap, Inc. |
26.00 |
29.52 |
-3.52 |
-11.9% |
|
Expeditors Intl. of Washington, Inc. |
53.50 |
59.63 |
-6.13 |
-10.3% |
|
Helmerich & Payne, Inc. |
48.00 |
52.41 |
-4.41 |
-8.4% |
|
Genuine Parts Company |
87.50 |
95.19 |
-7.69 |
-8.1% |
|
C.H. Robinson Worldwide, Inc. |
69.50 |
75.48 |
-5.98 |
-7.9% |
|
Kohl's Corporation |
42.50 |
45.94 |
-3.44 |
-7.5% |
|
Xilinx, Inc. |
65.00 |
70.19 |
-5.19 |
-7.4% |
|
Torchmark Corporation |
74.00 |
79.74 |
-5.74 |
-7.2% |
|
Rockwell Automation, Inc. |
165.00 |
177.27 |
-12.27 |
-6.9% |
At the sector level one year ago (September 30, 2016), the Materials (+18.0%) and Health Care (+14.3%) sectors had the largest upside percentage differences between the bottom-up target price and the closing price in the index. Over the past 12 months (since September 30, 2016), the Materials sector has recorded the fourth highest price return of all 11 sectors at 18.8%, while the Health Care sector has recorded the fifth highest price return of all 11 sectors at 12.8%. As previously noted, the S&P 500 recorded a price return of 15.8% during this same period.
At the company level, the S&P 500 can be divided into five quintiles based on the percentage difference between the median target price and the closing price on September 30, 2016 to analyze price performance. The quintile with the highest positive percentage differences between the median target price and the closing price on September 30, 2016 (Quintile 1) saw the third highest average price increase (+13.4%) and the third highest median price increase (+13.7%) of the five quintiles during this period. The quintile with the highest negative percentage differences between the median target price and the closing price on September 30, 2016 saw the lowest average price increase (+12.0%) and the lowest average median price increase (+12.3%) of the five quintiles during this period. However, all five quintiles recorded double-digit price returns during this period. The third quintile (Quintile 3) recorded the highest average price increase (+15.7%) during this period, while the second quintile (Quintile 2) recorded the highest median price increase during this period. Price returns for companies in the index that were acquired or no longer traded publicly after September 30, 2016 (i.e. do not have a current trading price) were excluded from the price analysis for the quintiles.