Goldman Sachs lifts its 2020 earnings estimates after better-than-expected 2nd quarter results, and sees a big beat in 2021

• Goldman Sachs on Friday lifted its 2020 S&P 500 earnings-per-share estimate following better-than-expected second-quarter results, analysts led by David Kostin wrote in a note.
• Now, Goldman expects 2020 S&P 500 EPS of $130, from $115. That's about 21% lower than 2019.
• Goldman also thinks S&P 500 earnings will surge to $170 per share in 2021, a more than 30% jump. The estimate is tied to Goldman's economic growth outlook.
• Read more on Business Insider.

Following better-than-expected second-quarter earnings results amid the coronavirus pandemic, Goldman Sachs has lifted its earnings-per-share estimate for the S&P 500 this year.

Goldman now expects S&P 500 earnings per share of $130, up from its previous forecast of $115, analysts led by David Kostin wrote Friday. The new estimate is about 21% lower than 2019 earnings.

"S&P 500 results cleared an extremely low bar," Kostin wrote. Of the 88% of S&P 500's market capitalization that's reported earnings so far, 58% have beat expectations "by more than a standard deviation of estimates," according to the note.

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Of the bump in the firm's S&P 500 per-share earnings, $11 reflects the better second quarter earnings results, said Kostin. Goldman now expects that third and fourth quarter earnings will be 20% and 14% lower on a quarterly basis, boosted from 30% and 17% slumps expected previously.

"High-frequency activity indicators, such as consumer spending measures, have improved since April, but softened in July as virus case counts have surged," said Kostin. "Our estimates compare with consensus forecasts of -23% and -14%."

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In addition, Goldman Sachs feels more confident about its above-consensus estimate for S&P 500 earnings in 2021 of $170 per share, a 30% jump over its 2020 forecast, following second quarter results. The bank's estimate is primarily driven by its economic outlook, which forecasts a 5% jump in US gross domestic product in 2020 and 5.6% in 2021.

"While positive consensus EPS revisions are rare, they typically occur as the economy emerges from recessions," said Kostin. Goldman Sachs isn't expecting an even earnings recovery, however — the firm said that info tech and health care will surpass their 2019 earnings levels by 2021, while other cyclical sectors including financials and energy will face a more gradual recovery.

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