Ed Hyman Ventures a Guess on 2027 Earnings and It’s $300 a Share
(Bloomberg) -- It’s standard Wall Street procedure to make predictions about earnings for this year, or next year, or two years hence. But the profit prognosis for a half-decade from now -- would anyone dare look that far out?
The answer is yes. One of Wall Street’s most venerated economists is willing to venture thoughts on S&P 500 earnings in the year 2027. Ed Hyman, the chairman of Evercore ISI, says that a rough model of progressive gains would put S&P 500 profits at an annualized pace of $300 a share in the final quarter of that year -- and possibly mark the end of the current cycle.
“Expansions last five to 10 years. So that’s a start,” Hyman, who put the exercise in a research note, wrote in a follow-up email. Explosive earnings during the last two quarters make “our 4Q 2022 forecast of $250 look well reachable. In the last decade expansion, earnings grew around +6% per year. +6% for five years after $250 gets you $300.”
Expectations such as these could explain confidence in equities at a time when Wall Street is debating where the market and economy stand in the current cycle. While some strategists point to stretched valuations and record equity issuance as signs of a maturing bull market, others say stock leadership and corporate earnings suggest the bull run has further to go.
Hyman was among the first to flag the pandemic’s hit to the business world. In March 2020, when analysts were still predicting a profit expansion for S&P 500 firms, he said earnings could fall 15% that year and stay below pre-pandemic levels the following year.
His forecast on 2020 was prescient as S&P 500 profits ended up sliding 12% that year. Though he under-estimated corporate America’s earnings power on the way up. With companies beating analyst estimates at unprecedented paces, a profit recovery that was expected to take years is now on track to be done by June -- over a span of just five quarters.
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