Sales & Earnings Probably Need to Do the Heavy Lifting for Stocks to Continue Higher

In a year when the US is experiencing massive fiscal austerity, monetary tightening, war, inflation and a pandemic, there are many drags to stock performance. In our view, this puts the onus on sales and earnings to carry the S&P 500 higher. Fortunately, so far, sales and earnings estimates for 2022 have been pretty resilient. Let’s look at the details.

Looking out over the next few years, sales and earnings per share are anticipated to show reasonable growth. Earnings are expected to grow around 10% each of the next three years. All of the following data is for the S&P 500 Index, sourced from Factset.

How have these estimates changed recently? Are we seeing a deterioration in earnings and sales trends? No, not in the data.

Even the breadth of revisions is positive. For 2022, there are 172 companies that have revised up 2022 earnings estimates and 170 that lowered them. Only 145 companies have taken down sales estimates for this year while 229 have raised their sales estimates.

These resilient fundamentals are certainly contributing to the resilience of the stock market this year. We’ll be keeping a close eye on this data given it’s importance in holding stock prices up.





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