How Good Are Earnings Forecasts?

Political  Calculations
Posted: Jan 28, 2012 12:01 AM

How good are stock market earnings forecasts?

Well, if you go by our chart below, which we constructed by sampling data we obtained from S&P roughly one-year apart (at the dates indicated) and mostly looking one-year-ahead in time, the answer is: not good at all!

One-Year-Ahead Forecasts of S&P 500 
Trailing Twelve Month Earnings per Share, 2009-2012

The moral of the story: future earnings projections are not necessarily very good indications of actual future earnings!