Like U.S. GDP growth, corporate earnings face a total collapse as the coronavirus pandemic forces business activity to grind to a halt.
The sudden shutdown of much of the world’s largest economy has sent stocks diving from all-time highs into a bear market at a record pace. Wall Street now thinks a deep recession is a foregone conclusion, and Goldman Sachs expects Corporate America to pay a heavy price as earnings per share (EPS) get hammered.
This puts Goldman on the bearish end of the analyst spectrum. According to a recent Factset survey, the average forecaster is looking for about $170 in EPS for the S&P 500.
“On a quarterly basis, this reflects year/year growth of -15%, -123%, -21% and +27%,” Kostin said about the first, second, third and fourth quarters, respectively.
“We have cut our 2020 earnings forecast three times in 30 days (-37% in total) as the magnitude of the economic slowdown has become increasingly apparent,” Kostin added — a reflection of how analysts have barely been able to keep up with COVID-19’s impact on the real economy.
On Friday, Goldman’s U.S. economics team wrote that it expects GDP to fall at a 24% rate in Q2. Kostin estimates when Q2 earnings are all tallied up, S&P 500 companies in aggregate will have reported a $10 net loss per share.