Corporate America overestimating sales, warns Goldman Sachs

Corporate America’s expectations for sales next year are too high given the outlook for a moderating economy and weaker dollar, according to Goldman Sachs Group Inc. strategists.

The team led by David Kostin said it expects S&P 500 sales to rise by 4% in 2025 compared with 6% this year, as the median stock outside the energy sector is more sensitive to the economy and less international-facing.

By contrast, analysts expect a 5.8% increase in 2025 revenue, according to data compiled by Bloomberg Intelligence.

The median analyst forecast “for a sharp acceleration in sales growth appears slightly too optimistic,” Kostin wrote in a note dated Aug. 16.

S&P 500 companies are on track to post the sharpest increase in quarterly earnings since 2021, data compiled by BI show. At the same time, the share of firms beating sales estimates in the second quarter is the smallest since 2019, raising concerns about the resilience of profit margins.

Kostin still sees margins expanding next year, as a slowdown in price increases has been countered by easing cost pressures, including wages. Still, the strategist said margins are unlikely to expand as much as analysts expect.

Morgan Stanley strategist Michael Wilson, meanwhile, has warned about a shorter-term weakening in the earnings outlook, in line with the seasonal trend.