John Butters, Senior Earnings Analyst
Media Questions/Requests
[email protected]
[email protected]
January 4, 2017
Key Metrics
• Of the 11,414 ratings on S&P 500 companies at the end of the fourth quarter, 49% were Buy ratings, 45% were Hold ratings,
and 6% were Sell ratings.
• At the sector level, the Health Care and Information Technology sectors had the highest percentages of Buy ratings (56%),
while the Consumer Staples, Energy, and Utilities sectors had the highest percentages of Sell ratings (8%).
• During the fourth quarter, the number of Buy ratings increased by 1.7%, the number of Hold ratings increased by 2.6%, and
the number of Sell ratings decreased by 2.8%.
• The bottom-up target price for the S&P 500 at the end of the fourth quarter was 2456.39, which was 9.7% above the
December 31 closing price of 2238.83.
• At the sector-level, the Health Care sector had the largest upside difference between the bottom-up target price and the
closing price (+16.6%), while the Telecom Services sector had the smallest upside difference between the bottom-up target
price and the closing price (+1.4%).
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1
Targets:
Industry Analysts Project 10% Price Increase for S&P 500 over Next 12 Months
During the fourth quarter, the S&P 500 index recorded an increase in value of 3.3% (to 2238.83 from 2168.27). During
the past 12 months, the S&P 500 index witnessed an increase in value of 9.5% (to 2238.83 from 2043.94.03). Where
do industry analysts believe the price of the index will go from here?
Industry analysts in aggregate predict the S&P 500 will see a 9.7% increase in price over the next twelve months. This
percentage is based on the difference between the bottom-up target price and the closing price for the index at the end
of December. The bottom-up target price is calculated by aggregating the median target price estimates (based on
company-level estimates submitted by industry analysts) for all the companies in the index. On December 31, the
bottom-up target price for the S&P 500 was 2456.39, which was 9.7% above the closing price of 2238.83.
At the sector-level, the Health Care sector had the largest upside difference between the bottom-up target price and
the closing price (+16.6%), while the Telecom Services sector had the smallest upside difference between the bottomup target price and the closing price (+1.4%). For company-level numbers, please see page 10.
How accurate have the industry analysts been in predicting the future value of the S&P 500?
On December 31, 2015 (one year ago), the bottom-up target price was 2335.73. Compared to the actual closing price
of 2238.83 at the end of December 2016, industry analysts overestimated the price of the index by 4.3% one year ago.
Over the past 12 months (January 2016 to December 2016), the average difference between the bottom-up target
price estimate at the end of the month one year ago and the final price for the index at the end of the same month oneyear later has been +9.9%. In other words, industry analysts on average have overestimated the final price of the index
by 9.9% at the end of each month during the previous 12 months.
Over the prior 60 months (January 2012 to December 2016), the average difference between the bottom-up target
price estimate at the end of the month one year ago and the final price for the index at the end of that same month one
year later has been +0.4%. In other words, industry analysts on average have overestimated the final price of the index
by 0.4% at the end of each month during the previous five years.
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2
Ratings:
Small Uptick in Buy Ratings during Q4
Of the 11,414 ratings on S&P 500 companies at the end of the fourth quarter (December 31), 48.6% were Buy ratings,
45.4% were Hold ratings, and 6.0% were Sell ratings. During the fourth quarter, the overall number of ratings increased
by 1.8% (to 11,414 from 11,213).
Buy Ratings: Up 1.7%
The number of Buy ratings increased by 1.7% (to 5,547 from 5,456) compared to Q3. Eight sectors saw an increase in
Buy ratings, led by the Industrials (+9%) and Consumer Staples (+7%) sectors. Three sectors witnessed a decrease in
Buy ratings, led by the Telecom Services (-16%) and Financials (-11%) sectors.
At the company level in terms of Buy ratings, Envision Health Care (+7), Transocean (+5), and Mid-America Apartment
Communities (+5) recorded the largest increases in the number of Buy ratings during the quarter, while Harman
International Industries (-9), Level 3 Communications (-8), Keycorp (-8), and Time Warner (-8) witnessed the largest
decrease in the number of Buy ratings over this time frame.
Hold Ratings: Up 2.6%
The number of Hold ratings increased by 2.6% (to 5,180 from 5,050) relative to Q3. Seven sectors witnessed a rise in
the number of Hold ratings, led by the Telecom Services (+17%), Financials (+12%), and Consumer Staples (+11%).
sector. Four sectors witnessed a drop in the number of Hold ratings, led by the Materials (-16%) sector.
At the company level in terms of Hold ratings, Citizens Financials Group (+7), Level 3 Communications (+7), Zions
Bancorporation (+7), and Chesapeake Energy (+7) recorded the largest increases in the number of Hold ratings during
the quarter, while Xerox (-5) and Nucor (-5) saw the largest decreases in the number of Hold ratings over this time.
Sell Ratings: Down 2.8%
The number of Sell ratings decreased by 2.8% (to 687 from 707) relative to Q3. Four sectors witnessed a rise in the
number of Sell ratings, led by the Telecom Services (+20%) and Financials (+12%) sectors. Seven sectors witnessed a
drop in the number of Sell ratings, led by the Real Estate (-23%) and Energy (-11%) sectors.
At the company level in terms of Sell ratings, Entergy (+3) and Murphy Oil (+3) saw the largest increases in the number
of Sell ratings during the quarter, while HCP (-4), Deere & Company (-4), and Chesapeake Energy (-4) saw the largest
decreases in the number of Sell ratings during this time.
Sector-Level Ratings
Overall, analysts are most optimistic on the Health Care and Information Technology sectors, based on the
percentages of Buy ratings at the end of December. These two sectors tied for the highest percentage of Buy ratings
(56%) of all eleven sectors at the end of Q4. On the other hand, the Utilities sector continued to have the lowest
percentage of Buy ratings (35%) of any sector.
Analysts are most pessimistic about the Energy, Utilities, and Consumer Staples sectors, based on the percentages of
Sell ratings at the end of December. These three sectors tied for highest percentage of Sell ratings (8%) of all eleven
sectors at the end of Q4. On the other hand, the Health Care sector had the lowest percentage of Sell ratings (2%).
Definitions / Methodology:
The bottom-up target price for the S&P 500 is calculated using the same methodology to calculate the price of the
index, except the closing price of each company is replaced with the median target price for each company. The
median target price for each company is then multiplied by the float shares outstanding for that company. The numbers
for all the constituents are then aggregated and divided by the index divisor.
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Ratings: Sector-Level
Number of Buy, Hold, and Sell Ratings for S&P 500 (Source: FactSet)
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Real Estate
Telecommunication Services
Utilities
S&P 500
Copyright © 2017 FactSet Research Systems Inc. All rights reserved.
Buy
1035
327
573
574
724
608
1026
225
241
41
173
5547
Hold
951
381
461
658
533
640
689
209
316
61
281
5180
Sell
118
58
93
91
32
86
111
30
23
6
39
687
Total
2104
766
1127
1323
1289
1334
1826
464
580
108
493
11414
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Ratings: Revisions
Change in Number of Buy Ratings for S&P 500: 3 Month (Source: FactSet)
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Real Estate
Telecommunication Services
Utilities
S&P 500
Copyright © 2017 FactSet Research Systems Inc. All rights reserved.
31-Dec-16
1035
327
573
574
724
608
1026
225
241
41
173
5547
30-Sep-16
1055
307
562
646
681
556
983
220
231
49
166
5456
Diff (#)
-20
20
11
-72
43
52
43
5
10
-8
7
91
Diff (%)
-1.9%
6.5%
2.0%
-11.1%
6.3%
9.4%
4.4%
2.3%
4.3%
-16.3%
4.2%
1.7%
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Ratings: Revisions
Change in Number of Hold Ratings for S&P 500: 3 Month (Source: FactSet)
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Real Estate
Telecommunication Services
Utilities
S&P 500
Copyright © 2017 FactSet Research Systems Inc. All rights reserved.
31-Dec-16
951
381
461
658
533
640
689
209
316
61
281
5180
30-Sep-16
904
343
485
585
517
618
717
248
290
52
291
5050
Diff (#)
47
38
-24
73
16
22
-28
-39
26
9
-10
130
Diff (%)
5.2%
11.1%
-4.9%
12.5%
3.1%
3.6%
-3.9%
-15.7%
9.0%
17.3%
-3.4%
2.6%
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Ratings: Revisions
Change in Number of Sell Ratings for S&P 500: 3 Month (Source: FactSet)
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Real Estate
Telecommunication Services
Utilities
S&P 500
Copyright © 2017 FactSet Research Systems Inc. All rights reserved.
31-Dec-16
118
58
93
91
32
86
111
30
23
6
39
687
30-Sep-16
120
55
104
81
33
94
116
28
30
5
41
707
Diff (#)
-2
3
-11
10
-1
-8
-5
2
-7
1
-2
-20
Diff (%)
-1.7%
5.5%
-10.6%
12.3%
-3.0%
-8.5%
-4.3%
7.1%
-23.3%
20.0%
-4.9%
-2.8%
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Ratings: Company-Level
Highest % of Buy Ratings for S&P 500: Top 10 (Source: FactSet)
Sell
0%
0%
2%
0%
2%
2%
0%
2%
0%
0%
Total
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Highest % of Hold Ratings for S&P 500: Top 10 (Source: FactSet)
Buy
Hold
Sell
Linear Technology Corporation
0%
95%
5%
St. Jude Medical, Inc.
5%
95%
0%
Public Storage
5%
89%
5%
Fastenal Company
6%
89%
6%
Mettler-Toledo International Inc.
7%
86%
7%
Hasbro, Inc.
14%
86%
0%
Staples, Inc.
14%
86%
0%
Garmin Ltd.
0%
86%
14%
HCP, Inc.
5%
84%
11%
PPL Corporation
16%
84%
0%
Total
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Envision Healthcare Corp.
Broadcom Limited
salesforce.com, inc.
LKQ Corporation
Alphabet Inc. Class A
Alphabet Inc. Class C
UnitedHealth Group Incorporated
Facebook, Inc. Class A
Amazon.com, Inc.
Thermo Fisher Scientific Inc.
Buy
95%
94%
94%
94%
93%
93%
92%
91%
91%
90%
Hold
5%
6%
4%
6%
5%
5%
8%
7%
9%
10%
Highest % of Sell Ratings for S&P 500: Top 10 (Source: FactSet)
Transocean Ltd.
Mosaic Company
People's United Financial, Inc.
Paychex, Inc.
Murphy Oil Corporation
Torchmark Corporation
Western Union Company
Consolidated Edison, Inc.
Campbell Soup Company
VeriSign, Inc.
Copyright © 2017 FactSet Research Systems Inc. All rights reserved.
Buy
18%
18%
0%
13%
9%
0%
15%
6%
0%
0%
Hold
42%
45%
64%
52%
59%
69%
56%
65%
71%
71%
Sell
39%
36%
36%
35%
32%
31%
30%
29%
29%
29%
Total
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
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8
Targets: Sector-Level
Difference between S&P 500 Bottom-up Target Price & Closing Price (Source: FactSet)
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Real Estate
Telecommunication Services
Utilities
S&P 500
Copyright © 2017 FactSet Research Systems Inc. All rights reserved.
Target
731.52
575.16
580.94
399.39
928.83
568.33
923.99
336.61
209.72
179.09
260.31
2456.39
Closing
647.82
531.79
554.50
386.53
796.91
538.07
807.95
312.16
190.23
176.61
246.83
2238.83
Diff ($)
83.70
43.38
26.44
12.86
131.91
30.26
116.04
24.45
19.49
2.48
13.48
217.56
Diff (%)
12.9%
8.2%
4.8%
3.3%
16.6%
5.6%
14.4%
7.8%
10.2%
1.4%
5.5%
9.7%
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Targets: Company-Level
Difference (%) between Bottom-Up Target Price & Closing Price: Top 10 (Source: FactSet)
Xerox Corporation
Hanesbrands Inc.
Mallinckrodt Plc
Endo International Plc
Frontier Communications Corp.
Under Armour, Inc. Class A
Envision Healthcare Corp.
Alexion Pharmaceuticals, Inc.
salesforce.com, inc.
Range Resources Corporation
Target
10.75
34.00
78.00
25.00
5.00
37.00
90.00
171.50
95.00
47.50
Closing
5.75
21.57
49.82
16.47
3.38
25.17
63.29
122.35
68.46
34.36
Diff ($)
5.00
12.43
28.18
8.53
1.62
11.83
26.71
49.15
26.54
13.14
Diff (%)
87.0%
57.6%
56.6%
51.8%
47.9%
47.0%
42.2%
40.2%
38.8%
38.2%
Difference (%) between Bottom-Up Target Price & Closing Price: Closest to 0% (Source: FactSet)
SunTrust Banks, Inc.
Principal Financial Group, Inc.
Goldman Sachs Group, Inc.
CSX Corporation
Assurant, Inc.
Waste Management, Inc.
Regions Financial Corporation
Zions Bancorporation
Altria Group, Inc.
Spectra Energy Corp
Target
55.00
58.00
240.00
36.00
93.00
71.00
14.38
43.00
67.50
41.00
Closing
54.85
57.86
239.45
35.93
92.86
70.91
14.36
43.04
67.62
41.09
Diff ($)
0.15
0.14
0.55
0.07
0.14
0.09
0.02
-0.04
-0.12
-0.09
Diff (%)
0.3%
0.2%
0.2%
0.2%
0.2%
0.1%
0.1%
-0.1%
-0.2%
-0.2%
Difference (%) between Bottom-Up Target Price & Closing Price: Bottom 10 (Source: FactSet)
Transocean Ltd.
Xilinx, Inc.
Mosaic Company
CF Industries Holdings, Inc.
Helmerich & Payne, Inc.
ONEOK, Inc.
Motorola Solutions, Inc.
Loews Corporation
NVIDIA Corporation
Host Hotels & Resorts, Inc.
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Target
11.00
51.00
25.00
27.00
67.00
50.00
74.00
42.00
96.00
17.00
Closing
14.74
60.37
29.33
31.48
77.40
57.41
82.89
46.83
106.74
18.84
Diff ($)
-3.74
-9.37
-4.33
-4.48
-10.40
-7.41
-8.89
-4.83
-10.74
-1.84
Diff (%)
-25.4%
-15.5%
-14.8%
-14.2%
-13.4%
-12.9%
-10.7%
-10.3%
-10.1%
-9.8%
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11