Wall Street analysts don’t expect S&P 500 companies to blow the doors off with their fourth-quarter earnings reports when they start trickling out in January.
Quite the contrary, in fact, as weak economic growth, rising interest rates and stubborn inflation have prompted strategists to be cautious about the stock market in 2023.
Fourth-quarter earnings for S&P 500 companies fell 2.8%, according to recent data from FactSet. If proven correct, it would mark the first earnings decline reported by the S&P 500 since the third quarter of 2020 when profits fell 5.7%.
Expectations have already started to lower for the company̵[ads1]7;s earnings, FactSet data show. Estimated earnings per share for the fourth quarter have fallen 6.1% since September 30.
“Reduced nominal activity means less top-line growth and downward pressure on margins,” 22V Research founder Dennis DeBusschere wrote in a client note. “At the same time, management sentiment toward future earnings, as measured by the Amenity natural language processing tool, has turned deeply negative. The long-awaited decline in earnings has arrived.”
Despite a host of reasons — with the aforementioned earnings weakness among them — to be wary of stocks heading into the looming earnings season, analysts continue to remain bullish on their ratings.
There are 10,835 ratings on stocks in the S&P 500, FactSet points out. Of these 10,835 ratings, 55.3% are buy ratings, 38.8% are hold ratings and 5.9% are sell ratings.
But few stocks in the S&P 500 have sell ratings — suggesting analysts really don’t care about these stories.
Companies such as Principal Financial Group, T. Rowe Price Group and ConEd have more than 50% of the analysts covering them rating the stock a sell.
So as investors look to bounce back from a challenging year in the markets, here are a few names Wall Street is least confident will help turn things around for your portfolio.
Brian Sozzi is a major editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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