Wall Street signals profit slump may be over, boosts forecasts
Wall Street analysts are boosting US earnings forecasts even before results start rolling in, signaling that the worst of the profit slump is likely over as ebbing inflation eases the pressure on a broad swath of industries.
That’s pushed an indicator known as earnings-revision momentum — a gauge of upward-to-downward changes to expected per-share earnings over the next 12 months — to roughly positive territory and well over its November 2022 low of negative 70%, according to data compiled by Bloomberg Intelligence. It’s the most positive reading ahead of an earnings season since the first quarter of 2022, with forecasts recently only getting marked up after executives deliver the latest guidance.
The moves are a sign of growing optimism as companies get ready to start releasing third-quarter reports. While profits for S&P 500 firms are forecast to drop for a fourth straight quarter, it may mark the end of the decline as analysts expect per-share earnings to rebound in the final three months of the year.
The outlook is providing support for the stock market’s rebound this month on optimism that the Federal Reserve is poised to end its interest-rate hikes with economic growth still intact, even though some industries are still being squeezed by inflation pressures and a tight job market.
“Analysts have been forced to shift their earnings expectations, with many growing more bullish about profit growth in the year ahead and what companies can handle in the coming quarters without the headwind of the Fed continuing to raise rates,” said Jimmy Lee, chief executive of The Wealth Consulting Group.
Many sectors in the S&P 500 have posted improving earnings revisions. Energy producers have lead the way in recent weeks as
Read more on investmentnews.com
