By Teresa Rivas
First-quarter earnings season is mostly wrapped up, and the numbers were so good that two strategists raised their year-end S&P 500 targets.
In many ways this isn't new. Investors have been laser focused on earnings growth for some time, with artificial intelligence advances at the heart of that fundamental support for the rally. Yet the latest set of reports reinforced the fact that these factors are still in full effect.
This earnings season is on track -- with about 95% of companies having already reported -- to be the sixth straight quarter of double-digit earnings growth for the index, up a whopping 27% year over year. That includes better-than-expected results for big AI players like Nvidia and Google parent Alphabet, which recently crossed the $5 trillion mark. However, there was broad-based strength too, with an above-average four-fifths of companies beating both top- and bottom-line expectations, and a median earnings-per-share beat of 5.7%, also ahead of historical averages.
Those impressive numbers, along with the market's long-standing tendency to overlook geopolitics, helps to explain why the index is sitting near record highs despite the ongoing closure of the Strait of Hormuz.
"Stock investors have stayed upbeat in part because the earnings picture, especially in AI-capex-linked sectors, has remained healthy enough to sustain risk appetite," UBS Global Wealth Management Chief Investment Officer Mark Haefele wrote on Thursday. "U.S. companies reported the best earnings growth in four years in the first quarter. Meanwhile, despite the geopolitics, oil prices are close to unchanged since the end of March."
It's perhaps no surprise then that expectations are rising too, with the 12-month forward bottom-up consensus S&P 500 estimate now at $354, up from $320 three months ago, with the estimate for the median company up 3.4%.
Yet Haefele thinks that despite these raised numbers, strong underpinnings make higher profits sustainable: "We think that provided the U.S. consumer and the labor market hold up, continued economic growth and AI adoption should drive further U.S. earnings increases, supporting additional market gains over the medium term."
That leads him to estimate that S&P 500 2026 EPS will be $335, a 20% year-over-year jump, and to raise his year-end target for the index to 7,900, up from a prior 7,500.
Nor is he the only one who is optimistic.
CIBC Head of Equity and Portfolio Strategy Christopher Harvey is even more upbeat about where the index will end the year. On Wednesday he increased his 2026 S&P 500 EPS estimate to $310 from $298, on the back of first-quarter earnings growth, and he no longer thinks there will be any slowdown in EPS growth next year. As a result, he raised his 2026 year-end target for the index to 8,020 from 7,450.
Either way, the updated estimates provide further runway for the S&P 500, which is already up 8.8% year to date through Thursday's close. Using its closing value of 7,445.72 means that UBS's target implies more than 6% growth and CIBC's implies a 7.7% increase.
Let the good times roll.
Write to Teresa Rivas at teresa.rivas@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 22, 2026 13:55 ET (17:55 GMT)
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