8 hours ago
Goldman Sachs Flags Risk: S&P's Q2 Beat Masks Stretched 2026 Margins
Aug 18 - S&P 500 companies posted stronger-than-expected second-quarter earnings, but Goldman Sachs (NYSE:GS) urges caution on profit margins for 2026. David Kostin, Goldman's chief U.S. equity strategist, says S&P 500 EPS rose 11% year over year, still above consensus, as analysts cut estimates earlier. Roughly 60% of reporters topped forecasts, reflecting a low bar heading into the season.
Guidance turned more positive: 58% of firms raised their 2025 outlook, double the rate from the first quarter, and analysts lifted EPS forecasts through late 2025 and into 2026. Still, Kostin warns the dramatic expansion baked into margin projections for next year looks unrealistic even if companies offset higher costs.
A weaker dollar helped nominal sales for large caps, while on a constant-currency basis real sales slowed across market caps and contracted for mid- and small-caps. The mega-cap tech subgroup, led by the Magnificent Seven, posted standout growth, with that cohort's EPS up 26%. Nvidia (NASDAQ:NVDA) remains a focal point; Wall Street has already boosted 2026 capex estimates.
Goldman expects analyst revisions to drift toward long-term trends rather than the sharp uplift priced into some forecasts.
This article first appeared on GuruFocus.
