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Industry Analysts Still Predict the S&P 500 Price Will Close Above 5,000 in the Next 12 Months

Earnings

By John Butters  |  March 28, 2022

The price of the S&P 500 has decreased by 5.2% since December 31. Where do industry analysts believe the price of the index will go from here?

The Bottom-Up Target Price Shows a 12-Month Increase of 16.8%

Industry analysts in aggregate predict the S&P 500 will see a price increase of 16.8% 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 March 24. 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 companies in the index. On March 24, the bottom-up target price for the S&P 500 was 5278.60, which was 16.8% above the closing price of 4520.16.

sp-500-closing-price-bottom-up-target-price

Expected Price Increases by Sector

At the sector level, the Communication Services (+27.9%), Consumer Discretionary (+21.1%), and Information Technology (+19.9%) sectors are expected to see the largest price increases, as these three sectors had the largest upside differences between the bottom-up target price and the closing price on March 24. On the other hand, the Energy (+4.5%) and Utilities (+5.0%) sectors are expected to see the smallest price increases, as these two sectors had the smallest upside differences between the bottom-up target price and the closing price on March 24.

sp-500-sector-level-bottom-up-target-price-vs-closing-price

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 March 24) can be found in the tables below. It is interesting to note that six of the 10 stocks expected to see the largest price increases are in the Consumer Discretionary sector, while four of the 10 stocks expected to see the largest price decreases are in the Materials sector.

S&P 500: Difference Between Median Target Price & Closing Price: Top 10 (Source: FactSet)

Company

Target

Closing

Diff ($)

Diff (%)

General Motors Company

75.00

44.35

30.65

69.1%

Bath & Body Works, Inc.

84.00

49.78

34.22

68.7%

PayPal Holdings, Inc.

187.50

116.05

71.45

61.6%

Under Armour, Inc. Class C

25.00

15.53

9.47

61.0%

Stanley Black & Decker, Inc.

221.00

138.74

82.26

59.3%

DISH Network Corp. Class A

49.00

30.90

18.10

58.6%

Whirlpool Corporation

280.00

182.79

97.21

53.2%

D.R. Horton, Inc.

120.00

78.83

41.17

52.2%

PVH Corp.

123.50

81.49

42.01

51.6%

Fortune Brands Home & Security

115.00

77.57

37.43

48.3%

S&P 500: Difference Between Median Target Price & Closing Price: Bottom 10 (Source: FactSet)

Company

Target

Closing

Diff ($)

Diff (%)

Nucor Corporation

124.70

153.52

-28.83

-18.8%

Archer-Daniels-Midland Co.

75.00

90.43

-15.43

-17.1%

Mosaic Company

61.00

68.57

-7.57

-11.0%

CF Industries Holdings, Inc.

95.00

106.40

-11.40

-10.7%

Newmont Corporation

70.00

78.23

-8.23

-10.5%

Occidental Petroleum Corp.

52.00

57.75

-5.75

-10.0%

Consolidated Edison, Inc.

83.00

91.41

-8.41

-9.2%

Baker Hughes Company Class A

34.80

38.29

-3.49

-9.1%

Pinnacle West Capital Corp.

68.00

73.94

-5.94

-8.0%

Halliburton Company

35.50

37.68

-2.18

-5.8%

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

In recent periods, industry analysts have underestimated the closing price of the index 12 months later. Over the past five years, Industry analysts have underestimated the price of the index by 2.8% on average (using month-end values). Over the past 10 years, industry analysts have underestimated the price of the index by 0.1% on average (using month-end values).

On March 31, 2021, the bottom-up target price was 4477.71. Nearly one year later (on March 24, 2022), the S&P 500 closing price was 4520.16. Based on yesterday’s closing price, industry analysts underestimated the closing price at the end of March 2022 by about 1% nearly one year ago.

However, over longer time periods, analysts have typically overestimated the closing price 12 months later. Over the past 15 years, industry analysts have overestimated the price of the index by 7.7% on average (using month-end values).

sp-500-bottom-up-target-price-vs-closing-price

It is interesting to note that after rising for 21 straight months (using month-end values), the bottom-up target price has declined over the past two months. Since January 31, the bottom-up target price has decreased by 0.8% (to 5278.75 from 5319.31). Despite the recent decrease, industry analysts still predict the index will close above 5,000 in 12 months.  

However, the movement in the index price and the movement in bottom-up target price have a high positive correlation. Thus, if there is a continuation in the decline in the price of the index, there will likely be a continuation in the decline in the bottom-up target price.

Listen to Earnings Insight on the go! In our weekly Earnings Insight podcast, John Butters provides an update on S&P 500 corporate earnings and related topics based on his popular Earnings Insight publication. The podcast is made available every Monday—listen on Apple podcasts, Spotify, or factset.com.

This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or 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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John Butters

Vice President, Senior Earnings Analyst

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.