Earnings Estimates

From Ed Yardeni's blog:

"The consensus bottoms-up forecasts for 2012 and 2013 are down to $105.07 and $117.94. Forward earnings, which is the time-weighted average of the current and coming year estimates, has recently flattened out around $111.26. That’s actually quite bullish since forward earnings tends to be a very good leading indicator of actual S&P 500 operating earnings over the coming year. If so, then actual earnings should add up to about $110 from now through mid-2013."

Using these consensus estimates that Yardeni lists above the S&P 500 currently trades with respective PEs of 12.61 and 11.23 and respective earnings yields of 7.9% and 8.9%.

When using historically averaged PEs between 14 and 16 nets the following respective valuations.  

2012 earnings of 105.07

a 14 PE equals an S&P 500 price target of 1,471

a 15 PE equals an S&P 500 price target of 1,576

a 16 PE equals an S&P 500 price target of 1,681

2013 earnings of 117.94

a 14 PE equals an S&P 500 price target of 1,651

a 15 PE equals an S&P 500 price target of 1,769

a 16 PE equals an S&P 500 price target of 1,887

We are using 103.75 for 2012 and a range of 110-112 for 2013.  I think that consensus 2013 number is way too high!

Yardeni: S&P500 Forward Earnings

*Long ETFs related to the S&P 500 in client and personal accounts.