Over the past few weeks we’ve been highlighting how the earnings backdrop has stabilized, which has helped the US equity market find its footing. One example in our data: the rate of upward EPS estimate revisions hit 28.5% a few weeks ago, it’s typical non-crisis low, and is now up to 42%. Bottom-up consensus for S&P 500 EPS is also holding steady at $265.
After a preliminary model refresh, we are maintaining our 2025 S&P 500 EPS forecast of $258, which is below that bottom-up consensus of $265.
We refreshed our EPS model last week for the new changes published by RBC’s economists, and Rates and FX strategy teams. Key numbers were 1.2% annual real GDP, 3 Fed cuts, 10 year yield moving up initially then ending the year at 3.8%, and inflation in the upper 2’s. We also moderated our assumption for 2Q margin pressure. The exercise confirms $258 is still a reasonable expectation for the year.
Beyond our modeling, history also points to the need for some downward revisions. Typically, the bottom-up consensus is cut by about 9% from the middle of the prior year – that would take 2025 to around $250. Importantly, cuts tend to be completed by the middle of the year in question.
