Goldman Sachs, BofA boost US stocks forecast
NEW YORK: Goldman Sachs Group Inc. and Bank of America Corp. raised their forecasts for profit growth by Standard & Poor's 500 Index companies, citing an improving global economy and record cash on corporate balance sheets.
Rising profits will push stock prices up while leaving the S&P 500 below the record high it reached in 2007, strategists at the firms said in reports today and yesterday. At Goldman Sachs, David Kostin predicted the S&P 500 will end next year at 1,450, up 19 percent. Bank of America's David Bianco raised his 12-month target for the index to 1,400 from 1,350.
Kostin forecast combined earnings per share for S&P 500 companies of $84 in 2010, $94 next year and $104 in 2012 in a report dated Dec. 1. Bianco, chief U.S. equity strategist at Bank of America, in a report today estimated profit of $85 a share this year, $93 a share in 2011 and $99 a share in 2012. Earnings peaked at $85.32 a share in 2007, according to Bloomberg data.
"The path of earnings growth has rarely been smoother," Kostin said in the report. "The key macroeconomic inputs to our sales, margins and earnings models all represent tailwinds at this time."
Improving U.S. and global economic growth will boost sales, and companies are likely to use cash for share buybacks, dividends and acquisitions, the strategists said. Low interest rates and inflation will also support gains in stock prices, they said. The S&P 500 peaked at 1,565.15 in 2007. It rose 1 percent to 1,218.22 as of 1:32 p.m. in New York today. -PB News