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Earnings estimates for 2023 are elevated compared to what has occurred in prior economic slowdowns.

The blended y/y earnings growth rate for the S&P 500 is estimated to come in at +5.8% for 2023. Analysts are forecasting a +36.0% jump in Consumer Discretionary earnings, followed by +14.2% in Financials, +13.9% in Industrials, and +10.2% in Communication Services. Energy, Materials, and Health Care are projected to have negative earnings growth at -11.7%, -9.0%, and -2.8%, respectively.

Source: FactSet.

The earnings per share estimate for the S&P 500 in 1Q23 is $55.00, followed by $57.53, $59.27, and $60.12 over the next three quarters. According to these estimates, the worst of the earnings decline will occur in 4Q22, and 2023 earnings will accelerate sequentially each quarter and on a y/y basis. Looking at the calendar-year totals, analysts are forecasting an increase in y/y earnings for the third consecutive year at $232.51 from $221.10 in 2022 and $208.44 in 2021.

Source: FactSet.

In prior recessions, earnings growth declined -25% on average. The best y/y earnings growth during a recession was +7% from 1979 through 1980 and the worst was -79% from 2007 through 2009. In what has been considered more mild recessions, earnings still declined -29% from 1989 through 1992 and -48% from 2000 through 2002.

Source: Hedgeye.

If the economy continues to slow, we could see weaker earnings growth in 2023 compared to what is currently being forecasted.


The views expressed herein are presented for informational purposes only and are not intended as a recommendation to invest in any particular asset class or security or as a promise of future performance.  The information, opinions, and views contained herein are current only as of the date hereof and are subject to change at any time without prior notice.


Joseph Khoury

Senior Economic Analyst
Boyd Watterson Asset Management, LLC