Editors' Pick: Originally published Jan. 11.
Market volatility in 2016 has caused many investment firms to amend their annual outlooks.
Last week Goldman Sachs stepped away from the herd, shaving its earnings expectations for the S&P 500 for 2015, 2016 and 2017, citing energy as "the leading driver of our reduced profit outlook," in a note to clients on January 7.
On Monday, Deutsche Bank was the latest investment firm to cut its 2015 S&P 500 earnings forecasts.
"Since publishing our 2016 outlook report in early December, many macro drivers of S&P EPS have deteriorated further," Deutsche Bank analysts wrote in a note on Monday. "In particular, oil prices legged down again, key currencies fell further and U.S. industrial activity continues to contract on weak capex and exports."
Deutsche Bank now expects fourth-quarter non-GAAP earnings for the S&P "to be down 2% y/y instead of flat and 2015 S&P EPS flat vs. 2014," the note read. As well, "these challenges are spilling" into the first quarter. The firm estimates first-quarter EPS for the S&P between $120 and $125, however that is highly dependent on oil prices.
An estimate of earnings per share of $125 for the Index assumes that oil prices average about $55 a barrel in in 2016. "This seemed reasonable several weeks ago, but now it doesn't," the note read. "A 25% rally in oil prices would result in only $40-45/bbl oil. This is still too low for Energy sector profits to be up in 2016."