Targets and Ratings: Understanding the unlikely optimism for 2012

In this podcast we speak with John Butters, Senior Earnings Analyst for FactSet. 

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Highlights from our episode:

• Analysts have become more optimistic at the beginning of 2012 than they were in 2011; 54% of their ratings overall are Buy ratings, up over last year
• Analysts are most optimistic about the Energy sector and most pessismistic about the Utilities sector
• These same two sectors were also the top and bottom a year ago, and while the Energy sector did indeed outperform, the Utilities sector did as well, meaning analysts as an aggregate undervalued the sector
• From a directional standpoint, most analysts got it right with what to buy and what to sell, but when you get to the specific level, none of the 10 companies with the highest price appreciation were also in the top 10 of buy percentages in 2011
• Companies expected to perform the best according to targets and ratings include Halliburton and Apple
• On the flip side, analysts giving sell ratings to companies that either expect a decline in earnings year over year, such as Sears Holding or companies where valuations have run high, such as Hormel Foods
• 6 of the 10 companies with the highest expected price appreciation are in the Energy sector
• The market continues to trade below the 5- and 10-year averages, so while there is the potential for earnings to not be particularly strong, the historically low valuations could drive some price appreciation
  
  

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