Goldman Cuts S&P 500 Earnings Estimate, Citing Margin Headwinds

(Bloomberg) — Goldman Sachs Group Inc. lowered earnings estimates for the S&P 500 Index for every year until 2024, saying margins contraction within the third-quarter indicators extra ache forward.

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“We consider S&P 500 margins have inflected downwards and decrease our estimates to include larger margin contraction,” strategists together with David J Kostin wrote in a observe dated Nov. 4. “We forecast S&P 500 margins excluding power will contract by 86 bp in 2022 and 50 bp in 2023 and return to the pre-pandemic 2019 degree of 11.3%.”

The margin contraction seen within the September-quarter is the primary because the pandemic, marking a flash level for estimates, notably for subsequent 12 months, Kostin and staff wrote. They now anticipate earnings to stay flat in 2023 versus a 3% progress earlier.

Goldman strategists lowered earnings estimates for this 12 months to $224 from $226, for subsequent 12 months to $224 from $234, and for 2024 to $237 from $243. The revision implies annual progress of seven%, 0%, and 5%, respectively, for the important thing metric.

They saved year-end S&P 500 targets unchanged for 2022 and 2023 at 3,600 and 4,000. This implies the gauge is anticipated to fall by 4.5% by the tip of this 12 months.

Whereas the cuts in 2023 estimates have been sharp, there are extra draw back dangers because the S&P 500 Index’s earnings per share might fall an additional 11% throughout a recession, the strategists wrote.

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