Chart of the Day: Corporate Earnings

Fight disinformation. Get a daily recap of the facts that matter. Sign up for the free Mother Jones newsletter.

Via Paul Kedrosky, here’s a McKinsey chart comparing projections of corporate earnings by Wall Street analyst with the actual results. As you can see, the analysts relentlessly overestimate earnings.

Actually, what I find most interesting about this chart isn’t the overestimation — though that’s fascinating — but the remarkable steadiness of their earnings projections. For 25 years, with the exception of a few years starting in the late 90s, through good times and bad, consensus earnings for the S&P 500 have been right around 12-13%. No matter what’s going on in the broader economy, Wall Street always thinks earning will be at least 12% or higher. Coincidentally, I’m sure, this is also the direction of error most likely to get their clients to churn stocks.

Anyway, it’s nice work if you can get it. If any Wall Street firm wants to hire me, I’ll be happy to project 13% earnings forever and then make up good stories to justify it. I think I’d be good at it. And my services probably come cheaper than the analysts they’re using now. Any takers?

HERE ARE THE FACTS:

Our fall fundraising drive is off to a rough start, and we very much need to raise $250,000 in the next couple of weeks. If you value the journalism you get from Mother Jones, please help us do it with a donation today.

As we wrote over the summer, traffic has been down at Mother Jones and a lot of sites with many people thinking news is less important now that Donald Trump is no longer president. But if you're reading this, you're not one of those people, and we're hoping we can rally support from folks like you who really get why our reporting matters right now. And that's how it's always worked: For 45 years now, a relatively small group of readers (compared to everyone we reach) who pitch in from time to time has allowed Mother Jones to do the type of journalism the moment demands and keep it free for everyone else.

Please pitch in with a donation during our fall fundraising drive if you can. We can't afford to come up short, and there's still a long way to go by November 5.

payment methods

ONE MORE QUICK THING:

Our fall fundraising drive is off to a rough start, and we very much need to raise $250,000 in the next couple of weeks. If you value the journalism you get from Mother Jones, please help us do it with a donation today.

As we wrote over the summer, traffic has been down at Mother Jones and a lot of sites with many people thinking news is less important now that Donald Trump is no longer president. But if you're reading this, you're not one of those people, and we're hoping we can rally support from folks like you who really get why our reporting matters right now. And that's how it's always worked: For 45 years now, a relatively small group of readers (compared to everyone we reach) who pitch in from time to time has allowed Mother Jones to do the type of journalism the moment demands and keep it free for everyone else.

Please pitch in with a donation during our fall fundraising drive if you can. We can't afford to come up short, and there's still a long way to go by November 5.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate