Goldman: ‘The worst phase of negative earnings revisions is now behind us’

The Q1 earnings season has proven to be more resilient than what some analysts were expecting. So far, the EPS is down 3% year-over-year, better than the 7% decline that the Street was looking for.

As a result, Goldman Sachs equity analysts are increasingly more confident in their above-consensus EPS estimate of $224 in 2023, representing +1% growth.

“We believe the worst phase of negative earnings revisions is now behind us,” they said in a client note.

The analysts also note that risks to the profit outlook are “tilted to the downside given uncertainty around banking stress.” They also expect real yields are expected to climb and P/E to fall from 18x to 17x.

“If the P/E remains stable, it would represent 5% upside to our year-end target of 4000,” they added.

On a more negative note, Goldman’s 2024 EPS estimates are currently under consensus as the analysts argue that Street is “too optimistic” on margins for the next year.