As you can see in the chart below, the estimates for 2013 during the first 6 months of 2012 stayed about the same until companies provided more guidance for the next year around July 2012. This is when earnings estimates for 2013 began to decline. During the last quarter of 2012, the decline in earnings estimates for 2013 decreased more dramatically. While the decline may just be an adjustment to have more accurate numbers, we find it interesting that in January 2012, the expectations for earnings for the calendar year 2012 were roughly $110.00. However, the actual operating earnings for the S&P 500 will likely come in around $98.00, well below the $110.00 estimate from January 2012.
If the estimates right now ($111.50) are accurate the markets should experience solid earnings growth in 2013 versus 2012. However, if these estimates continue to move lower over the course of this year (as they did last year), we would expect the markets to adjust expectations accordingly causing volatility to increase. Earnings estimates will be an important barometer of the economic health of the economy and should be watched carefully over the coming months.
