Wall Street Bullish on S&P 500 as Corporate Profits Rebound

Goldman Sachs (GS) has raised its target for the benchmark S&P 500 (^GSPC) index for the year-end and the next 12 months, citing expectations of higher margin growth for corporate companies and a steady macroeconomic outlook through 2025.

Unlocking the Potential of Corporate America's Earnings Surge

Revised S&P 500 Targets: A Bullish Outlook

The Wall Street brokerage has lifted the index target for the next twelve months to 6,300 from 6,000 and raised the current year-end target to 6,000 from 5,600. This revised target implies an upside of 4.32% from the index's last close of 5,751.07 on Friday. The brokerage's optimism is driven by its belief in the continued strength of the US economy and the resilience of corporate America's earnings.

Earnings Per Share (EPS) Growth: A Promising Trajectory

Goldman is also bullish on the earnings per share (EPS) growth of corporate America, raising its 2025 EPS estimate to $268 from $256, reflecting an 11% increase on an annual basis. The brokerage maintained its 2024 EPS forecast at $241, indicating a steady and sustainable growth trajectory for corporate profits.

Macro Backdrop: Conducive to Margin Expansion

According to Goldman's analysts, the primary driver of the upward revision to the 2025 EPS estimate is greater margin expansion. The brokerage cites a "steady macro outlook" as the foundation for this optimism, with the US economy growing faster than initially expected in the second quarter, driven by strong consumer spending and a rebound in corporate profits.

Tailwinds for Corporate Earnings

The brokerage also highlights additional factors that will further support companies' EPS growth, including a boost from mega-cap technology stocks and a recovery in the semiconductor industry cycle. These industry-specific tailwinds, combined with the broader macroeconomic trends, paint a compelling picture of the potential for continued earnings expansion in the coming years.

Sustaining the Economic Expansion

The rebound in corporate profits and the steady macroeconomic backdrop are seen as key drivers in sustaining the current economic expansion. Goldman's analysts believe that the "macro backdrop remains conducive to modest margin expansion," providing a solid foundation for companies to continue delivering strong financial results.Overall, Goldman Sachs' revised targets and bullish outlook on the S&P 500 and corporate earnings growth reflect a growing confidence in the resilience and potential of the US economy and the ability of corporate America to navigate the current landscape successfully. As the market navigates the evolving economic conditions, this optimistic assessment from a leading Wall Street firm could serve as a positive signal for investors and market participants.