Rising earnings estimates have more than offset a decline in the S&P 500’s valuation multiple this year.
Yardeni Research said in an Oct. 21 analysis that forward earnings had increased 31% since the start of 2026. The index gained 13.3% over the same period, while its forward price-to-earnings ratio declined 13.5%. The ratio compares the index’s level with projected earnings.
A higher index level therefore does not, by itself, mean investors are paying more for each dollar of expected profit. Yardeni’s figures track changes in forecasts for future earnings; the results now being released provide a separate measure of how companies performed in the third quarter.
Yardeni singled out the Semiconductors industry in the S&P 500 Information Technology sector as a source of earnings optimism, citing AI-driven demand and pricing power. It questioned how long those conditions could last.
FactSet put the index’s forward 12-month price-to-earnings ratio at 18.7 on Oct. 23, below its 10-year average of 19.1. Its estimate for third-quarter earnings growth stood at 29.5% from a year earlier. That figure combines results from companies that have reported with forecasts for those still to report, so it measures something different from Yardeni’s year-to-date change in forward earnings.
By Oct. 23, 24% of S&P 500 companies had reported, and 83% of them had exceeded earnings-per-share estimates. Their combined earnings were 2.1% above forecasts, compared with a five-year average of 7.5% for completed reporting seasons. In earlier coverage of third-quarter earnings, the beat rate was 84% when 9% of index companies had reported.
FactSet said growth of 29.5%, if sustained, would mark a third consecutive quarter above 25%. The next results are due from 179 S&P 500 companies scheduled to report during the week of Oct. 26.
