The S&P 500 risks another leg down after a “complete U-turn” in 2023 earnings-per-share estimates for the U.S. stock-market index, according to a BofA Global Research note, MarketWatch reported. “Forward estimates have been cut much larger than usual,” BofA equity and quant strategists said in a research note. They said that estimates for earnings per share, or EPS, for the S&P 500 in 2023 are down 3.6% since the start of October to $233 — 2.9 times the typical cut. While the 2023 EPS consensus remains “well above” BofA’s forecast of $200, estimates are 8% below the June peak of $252. Revisions so far this year are “now trending in line with the historical average,” and if the 2.9x pace of cuts continues through year-end, the S&P 500 could see “no EPS growth next year” as 2023 consensus would fall to around $220. “Actual EPS historically came in 4% below where consensus stood in the beginning of the year, which also points to potential for negative growth,” the strategists said. Meanwhile, estimates for S&P 500 EPS in the fourth quarter are down 4.3% since the beginning of October, or 2.5 times the typical estimate cut “at this point in earnings season,” they wrote. Analysts at Goldman Sachs Group said that they lowered their 2023 EPS growth forecast to 0%, from a previously expected increase of 3%, after the S&P 500’s net margins contracted in the third quarter for the first time since the pandemic on a year-over year basis. They wrote that “weak” third-quarter margins presage “a headwind” next year. Goldman kept its price target for the S&P 500 at year-end at 3,600 and also maintained its 2023 forecast of 4,000.
