Stock analysts are more bullish than bearish on earnings for the first time in two years. And their profit estimates imply a 26 percent gain for the Standard & Poor’s 500 Index, Bloomberg reports.
Analysts raised their earnings predictions on companies in the index 896 times last month, while lowering them 886, making them net bullish for the first time since the credit crisis began, according to JPMorgan Chase data.
Wall Street firms now figure the S&P 500 companies will earn $74.55 a share next year, up 3 percent from their forecast in May.
The S&P 500 traded at 13.13 times estimated profit at Friday’s close. If the index were to revert back to its 50-year average of 16.54 times earnings, stocks would have to gain 26 percent.
“There’s a sea change of opinion, and it all goes back to the improving economic data,” Fritz Meyer, senior market strategist for Invesco Aim, tells Bloomberg.
“Expectations got pushed too low in the depths of the recessionary mentality. That translates into upward revisions in earnings estimates and drives stock prices.”
The new earnings estimates posit a 25 percent increase for S&P 500 earnings next year from $59.80 a share predicted for this year, Bloomberg reports.
That would represent the biggest jump in 15 years.
Many have turned bullish on stocks. The market is “now on its way to around the 1,200 to 1,250 level for the S&P 500,” Shane Oliver of AMP Capital Investors tells CNBC.
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