Data &
Technology
Research
Reports
Report Solutions
Reports Library
Actionable
Strategies
Free
Resources
Simple Backtest Calculator
Simple Seasonality Calculator
The Kelly Criterion Calculator
Sentiment Geo Map
Public Research Reports
Free Webinar
Pricing
Company
About
Meet Our Team
In the News
Testimonials
Client Success Stories
Contact
Log inLoginSign up
< BACK TO ALL REPORTS

Companies and Wall Street are raising outlooks

Jason Goepfert
2020-07-01
U.S. companies have been raising their profit outlooks over the past month, in some respects to a record degree. Wall Street analysts have been upwardly revising their earnings estimates and price targets, too.

Companies are raising their outlooks.

After the uncertainty of the pandemic earlier this year, the past month+ has seen businesses gingerly re-open, with a little bit more optimism among executives. As a result, a greater percentage of them are thinking that profits will be higher than expected.

As noted by Bloomberg:

"Up, Down, and Neutral ratings are based on a comparison between the company forecast and the consensus analyst estimate. The Profit Outlook Net Index is calculated as the percentage of companies reporting higher profit outlooks and adding one-half of the percentage of companies reporting unchanged profit outlooks, relative to the consensus analyst estimates. A reading above 50 is positive, below 50 is negative, while 50 indicates no change."

Based on these definitions, companies haven't raised their outlooks to this degree in more than 20 years.

This should be a good sign for future returns but logic isn't always a good guide in markets. By the time companies became this enthused about their future profits, investors had already anticipated much of the gain.

At the same time, even though Wall Street strategists are apprehensive, analysts have been busy upgrading price targets on the stocks in their coverage universe. 

If we think about investors' risk being like an iceberg, then strategists would be warning about risks from above while analysts would be looking under the surface.

Below, we can see the net number of stocks within the S&P 500 that enjoyed a price target increase minus decrease. These technical upgrades were at a record high on June 10 and have settled down somewhat since then, but still high. This has tended to be a short- to medium-term contrary indicator.

Analysts have been upgrading earnings estimates on the stocks they cover, too, so they're becoming a bit more optimistic about company fundamentals.

This has been less of a contrary indicator than when analysts are just raising price targets. Like we saw in the January 14 report, when analysts are upgrading technicals but not fundamentals, it's a big worry. That's not so much the case now.

Overall, the rise in optimism from both companies and Wall Street seems like it should be a good sign, but the evidence is mixed. When optimism gets to a very high level, it has tended to be more of a contrary than confirming indicator. Because of that, we'd consider the current bout of positivity to be a slight negative, but it's not enough to consider it a sell signal.

Sorry, you don't have access to this report

Upgrade your subscription plan to get access
Go to Dasboard
DATA &
TECHnologies
IndicatorEdge
‍
BackTestEdge
‍
Other Tools
‍
DataEdge API
RESEARCH
reports
Research Solution
‍
Reports Library
‍
actionable
Strategies
Trading Strategies
‍
Smart Stock Scanner
‍
FREE
RESOUrCES
Simple Backtest
Calculator
Simple Seasonality
Calculator
The Kelly Criterion
Calculator
Sentiment Geo Map
‍
Public Research Reports
‍
Free Webinar
COMPANY
‍
About
‍
Meet our Team
‍
In the News
‍
Testimonials
‍
Client Success Stories
Pricing
Bundle pricing
‍
Announcements
‍
FAQ
© 2024 Sundial Capital Research Inc. All rights reserved.
Setsail Marketing
TermsPrivacyAffiliate Program
Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

Testimonial Disclosure: Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.