The S&P 500 Index is hovering near record levels after advancing 3.53 per cent in September. The technology sector led the rally with a 7.21-per-cent price return.
The top 10 performers in the S&P 500 Index during the month were:
- Warner Bros Discovery Inc. (WBD-Q), up 68 per cent
- Applovin Corp. (APP-Q), up 50 per cent
- Western Digital Corp. (WDC-Q), up 49 per cent
- Seagate Technology Holdings PLC (STX-Q), up 41 per cent
- Micron Technology Inc. (MU-Q), up 41 per cent
- Intel Corp. (INTC-Q), up 38 per cent
- Robinhood Markets Inc. (HOOD-Q), up 38 per cent
- Lam Research Corp. (LRCX-Q), up 34 per cent
- Tesla Inc. (TSLA-Q), up 33 per cent
- Paramount Skydance Corp. (PSKY-Q), up 29 per cent
For the first nine months of the year, the S&P 500 surged 13.72 per cent.
In a couple of weeks, the third quarter earnings season kicks off. Year-over-year earnings growth is expected to come in at 8.8 per cent, according to a report from LSEG I/B/E/S published on Sept. 26. This growth is expected to be driven by the technology sector with 22.2 per cent year-over-year earnings growth and 14.8 per cent revenue growth anticipated. The energy sector has the lowest earnings outlook with a year-over-year decline of 5.1 per cent expected.
Earnings growth forecasts continue to rise. For the third quarter, earnings growth of 8.8 per cent is forecast, up from 8.4-per-cent forecast last month. Year-over-year earnings growth for the fourth quarter is expected to come in at 7.7 per cent, up from last month’s 7.5-per-cent forecast. Year-over-year earnings growth is anticipated to come in at 10.8 per cent in 2025, up from 10.5-per-cent forecast last month, climbing to 14.1 per cent in 2026, up from 13.4-per-cent forecast last month.
Historically, October has been an unpredictable month for the S&P 500 Index. The index has posted gains in 11 of the past 20 years. To illustrate, the S&P 500 Index declined 0.99 per cent in Oct. 2024, fell 2.2 per cent in 2023, rallied 7.99 per cent in 2022, advanced 6.91 per cent in 2021, fell 2.77 per cent in 2020, and climbed 2.04 per cent in 2019.
According to the Sept. 26 LSEG I/B/E/S report, the forward four quarter price-to-earnings multiple for the S&P 500 stood at 23.3 times, up from 22.9 times as of August 29.
Now, here’s a look at analysts’ target prices, recommendations, forecast returns and yields for all securities in the S&P 500 grouped by sector and ranked according to their expected price returns (excluding dividend and distribution income). The posted target price for each security is an average of all available target prices from analysts. A target price typically reflects an expected share or unit price 12 months from now based on an analyst’s financial modelling, such as a discounted cash flow or sum-of-the-parts model. Data is as of Sept. 30.
It’s important to note that high target prices, which imply stellar returns that seem unbelievable may be just that - unrealistic. At times, when a stock price falls analysts may maintain their bullish expectations, inflating the forecast return. In addition, an outlier (extreme target price) can skew the average target price, to the upside or downside, particularly when the number of analysts covering a stock is low. Don’t let a huge projected gain lure you into a position – it is critical to look at the company and industry fundamentals.
Click here to download an Excel version of the report.
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