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S&P 500 gains as valuations cool and earnings growth accelerates
Forward price-to-earnings on the index fell from 22.1 to 20.0 times, even as earnings for S&P 500 companies rose 50.4% year over year, according to FactSet.
LiveMint Markets said the S&P 500 has risen 22% over the past year, but valuations have eased as the forward price-to-earnings ratio declined from 22.1 times forward earnings to 20.0 times, citing Bloomberg data.
The outlet linked the valuation drop to earnings growth outpacing price gains. It noted that during the second-quarter earnings season, 86% of companies beat estimates, above the 78% average, and that S&P 500 companies grew earnings 50.4% from a year earlier, according to FactSet.
LiveMint Markets also said expectations for the next quarter improved, with analysts raising third-quarter earnings estimates by 0.3% even though estimates are often cut at this stage. It quoted Evercore ISI’s Julian Emanuel describing the earnings strength as broadly extended across and within sectors.
The piece cautioned that the strength may not be risk-free, citing concerns raised by Verdence Capital Advisors’ Megan Horneman about “upgrades” continuing without an end in sight. It also referenced Barron’s Randall Forsyth and short seller Jim Chanos on potential accounting effects related to how AI spending is treated.
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