US Corporate Earnings Forecasts: Major Market Indexes

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The December survey of 2,400 security analysts affiliated with over 150 institutional brokerage and research firms, conducted by the Institutional Brokers Estimate System (I/B/E/S--U.S. edition), is forecasting a 20.1% increase in U.S. corporate earnings in 1992. The forecast is based on the United States I/B/EIS Universe of 4,134 publicly traded firms as of December 17, 1992. The expected growth rate is 26.2% for 1993. The growth rates expected for the Major Market Indexes are generally lower. Based on the current composition and shares outstanding, the S&P 500 earned $20.74 in 1991. Earnings are expected to increase 13.5% in 1992 to $23.54 and grow 24.2% in 1993 to $29.24. For the S&P 400, an increase in earnings of 15.6% is expected for 1992 (EPS of $25.21 is expected) and growth of 26.5% is anticipated for 1993 ($31.89). For the Dow Jones Industrial Average (DJIA), earnings are forecast to rise 18.1% in 1992 ($175.19) and 36.6% in 1993 ($239.23).

Estimate Revision Trends--Major Market Indexes As measured by the broad aggregates, earnings expectations have fallen in the past three months. The 1992 mean estimate for the I/B/E/S Universe is down -5. 1% and the 1993 estimate is down -4.4%. The 1992 estimate changes overthe past three months for the major market indexes are much worse than the I/B/E/S Universe. The 1992 mean estimate for the DJIA is down -12.3% while the S&P 400 and the S&P 500 have declined -5.8% and -5.3%, respectively. The 1993 estimate changes for the major market indexes are also worse than the IlBlE/S Universe over the past three months. The 1993 mean estimate for the DJIA is down -10.8% while the S&P 400 and the S&P 500 are down -6.5% and -5.1%, respectively.

THE ECONOMIC SECTORS

Final 1992 Sector Growth Outlook: Of the eleven economic sectors, Consumer Services has the highest calculable 1992 growth rate with an expected increase in earnings of 38.4% followed by a forecasted increase of 34.7% for the Transportation sector and an expected increase of 26.5% for the Financial Services sector. The Consumer Durables sector is expected to be profitable in 1992 after losing a record amount of money in 1991. The only sector expected to have a decrease in year-over-year earnings is Energy at -14.2%.

Final 1992 Sector Estimate Revision Trends: Since September, the 1992 mean estimate has decreased for all eleven of the economic sectors. The four sectors that have had estimate cuts of -9.2% or more are: Consumer Durables (-36.4%), Technology (-19.1%), Basic Industries (-10.7%) and Transportation (-9.2%). In the past three months, the 1992 mean for the Health Care sector registered a slight decline of 1.4%. In the past month, all eleven of the economic sectors have had a cut in their 1992 mean, three of which fell -2.1% or more. The largest cuts have occurred in the Technology (-9.3%), Consumer Durables (-3.8%) and Basic Industries (-2.1%) sectors. The 1992 means for the Financial Services sector fell just -0.1% in the past month.

1993 Sector Growth Outlook: Of the eleven economic sectors, Consumer Durables and Transportation have the highest expected 1993 growth rates of 184.3% and 110.2%, respectively, as earnings are expected to grow 47.6% a low base. The Basic Industries and Technology sectors are expected to grow 47.6% and 45.7% in 1993 after a difficult 1992. The Public Utilities sector has the lowest expected 1993 growth rate of 9.9% call of the other economic sectors are expected to experience earnings growth of greater than 18%.

1993 Sector Estimate Revision Trends: Since September, ten of the eleven economic sectors have had their 1993 mean estimates decrease. The largest cuts have occurred in the Technology (-17.1%), Consumer Durables (-15.8%), Basic Industries (-12. 1%) and Transportation (-7.6%) sectors. Over the past three months, the 1993 mean estimate has increased 0.1% for the Financial Services' sector. In December, ten of the eleven economic sectors have had a decline in their 1993 mean estimates. …