Goldman Says S&P 500 Earnings Forecast Could Rise Further

(Bloomberg) -- US corporate earnings may exceed current forecasts in 2024, powered by a strong economy and falling interest rates, said strategists at Goldman Sachs Group Inc.

S&P 500 companies’ earnings per share are forecast to rise 5% to $237 this year, the team led by chief US equity strategist David Kostin predicted in a weekly research note.  

That’s above the median $231-per-share forecast of strategists tracked by Bloomberg but could still be too low, the Goldman Sachs strategists said. 

“We see potential upside to our EPS estimate from stronger US economic growth, lower interest rates, and a weaker dollar” despite lower oil prices, the strategists said. 

Looking at 2023 fourth-quarter earnings, which will start rolling out in the coming week, the strategists expect S&P 500 firms “in aggregate will beat analyst forecasts” despite a higher bar than in recent quarters.

US data have remained strong in recent months despite concerns that the US central bank’s interest rate hikes, meant to tame high inflation, might tip the economy into a recession.  

Now that price pressures have abated, US Treasury Secretary Janet Yellen declared on Friday that the US ecohomy has achieved a rare “soft landing.” Futures and swaps traders are betting that the Fed will cut rates six times this year, starting with a likely quarter-point reduction in March.

Read more: Barkin Says Fed Can Lower Rates as Economy Normalizes 

The change in the Fed’s projected rate path has also caused the dollar to fall.

Kostin upgraded his view on the S&P 500 in December, taking his 2024 year-end forecast to 5,100 points from the 4,700 he had set just the month before. At that time, he said that the earnings prediction might be too conservative given looser financial conditions. 

At the end of 2022, Kostin predicted the S&P 500 would gain just a few percent to 4,000 as of year-end 2023. That made him one of numerous strategists to initially miss predicting the 24% rally that took the benchmark to 4,769.83 points at the close of the year.

The S&P 500 declined in the first week of 2024 for the first time in 10 weeks, snapping the longest streak of gains in almost 20 years.

(Updates with economic context from sixth paragraph.)

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