S&P 1500 Earnings Revisions

With the S&P 1500 poised to open lower this morning, the index will be trading down about 3% from its recent highs. When the week started, the market was trading at its highest levels since January, and things seemed good. Four days later, the mood has shifted 180 degrees. Suddenly, oil is going to $200 (Hey, Goldman Sachs said so), Lehman and the rest of the brokers are in trouble again (at least according to an investor who is short the stock), and Ford no longer expects to turn a profit in '09 (With the stock at $7 and change, did anyone really think Ford was close to turning a profit?).

While the news has been bleak, one positive trend that remains in place is analyst forecasts. We track the net number of analyst EPS revisions (positive revisions minus negative revisions) for stocks in the S&P 1500 on a daily basis. While revisions have been negative all year, since bottoming in January they have been consistently improving and currently stand at their highest levels of the year. Even during this week's sell-off, analyst revisions haven't budged.

Admittedly, analysts have built a reputation of notoriously being late to the game in terms of lowering forecasts, but for now at least the individuals who supposedly follow these companies the closest are sticking by their forecasts.

Comments

[gordon:]

My guess is they are too high, the consumer is caving. Malls, commercial real estate is going vacant, watch this play out in the next 6 months.

2008 May 24 01:05 PM

[Urbane Gori...:]

I used to pay attention to analysts forecasts.. Now I read the reports for a view of the business against its industry and the rely on technicals for a top or bottom... I like to hear that an analyst has increased his rating of any stock I own as that pushes the value up... But the rest is just reading chicken entrails...

Thx jegan ;-)

2008 May 24 09:47 PM