Home Guides & Resources chevron_right Economy and the Markets Chart of the Week: The Earnings Expectations vs. Reality Gap Published July 18, 2022 Charlie Toole, CFA, CFP®Director of Portfolio Management Wall Street analysts expect companies in the S&P 500 to report profits 4% higher than one year ago. If what’s past is prologue, we can expect two things: (1) That estimate is wrong and (2) it’s possibly too low. Over the last four years, Wall Street analysts have made meteorologists look like soothsayers. On average, their predictions for earnings growth when companies start to report quarterly profits have missed the mark by about 9%. As baseball player Yogi Berra famously quipped, “It’s tough to make predictions, especially about the future.” In addition to missing the mark, analysts have been too conservative. In 14 of the last 15 quarters, analysts’ estimates came in under companies’ actual results. If the Street has set another low bar this quarter, then earnings growth that hurdles the consensus 4% estimate would be some much-needed positive news in a market that’s been dominated by negative headlines. Note: Chart shows analysts’ expected year-over-year earnings growth for S&P 500 companies (as of the prior quarter-end) alongside actual reported earnings results from 9/30/2018 through 6/30/2022. Source: FactSet. This material is distributed for informational purposes only. The ideas and opinions contained herein should not be viewed as recommendations or personal investment advice. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed. Our statements and opinions are subject to change without notice. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged. Past performance is not an indication of future returns. Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice, or as advice on whether to buy or surrender any insurance products. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice, nor sell insurance products. Always consult a licensed attorney, tax professional, or licensed insurance professional regarding your specific legal or tax situation, or insurance needs. For a summary of Adviser Investments’ advisory services and fiduciary responsibilities to our clients, please review our Form CRS here. © 2022 Adviser Investments, LLC. All Rights Reserved. Tags: Charlie TooleChart of the Weekcorporate earningsearningsEarnings season