Shrinking profits: Strategists are again starting to reduce 2023 earnings estimates

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The problem is, even flattish earnings expectations may be too rosy. That story relies on profits stabilizing in the second half, and that may be wrong.

Call it the "incredible shrinking earnings story." Strategists are again starting to reduce earnings estimates. Analysts began cutting 2023 earnings estimates aggressively in the third quarter of last year. However, in February the rate of decline has slowed, but it now appears to be re-accelerating. Earnings: shrinking fast June 2022: $252 Dec. 1: $231 Jan.

"Multiples should flatline as persistently high inflation, tighter monetary policy and sub-par economic growth offset declining recession risk," Golub said in a note to clients. With 2022 earnings of roughly $220 already in the bag, a large part of Wall Street now expects earnings to be flattish to slightly negative for 2023. The problem is, even flattish earnings expectations may be too rosy.

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