Merrill Lynch: S&P Earnings Estimates Too High

ByJohn S. McClenahen Because it's projecting just 4% nominal growth (real growth plus inflation) in U.S. GDP this year, New York-based Merrill Lynch & Co., a major securities firm, is saying that current estimates of $54 in earnings-per-share (EPS) for the S&P 500 this year are simply too high. Merrill Lynch is anticipating $50 EPS, which would translate to 9% year-to-year growth, a lot less than the 17% growth that the $54 EPS figure represents. Among the 11 sectors of the U.S. economy for which Merrill is making individual projections, the firm foresees 9% growth in operating EPS for industrial stocks this year, higher than the consensus forecast of 6%. Part of the difference: Merrill is betting there'll modest amounts of inventory rebuilding going on in 2003 as well as a modest recovery in capital expenditures.