Goldman’s Kostin Says S&P 500 Earnings Surge Past Expectations

Goldman Sachs strategists, including Kostin, report S&P 500 companies significantly exceeded second-quarter earnings expectations, with aggregate EPS up 11% year-over-year, far surpassing the 4% consensus. This strong performance, seen in 60% of companies beating forecasts by over a standard deviation, is attributed to firms blunting tariff impacts and benefiting from a weaker dollar.

Analysis

S&P 500 companies demonstrated significant operational resilience and earnings power during the second-quarter reporting season, according to a Goldman Sachs analysis. Aggregate earnings per share (EPS) grew 11% year-over-year, substantially outpacing the 4% consensus expectation and signaling that market forecasts were overly conservative. The strength of this performance is underscored by its breadth, with 60% of the 92% of companies that have reported beating EPS estimates by more than one standard deviation. This robust outperformance is attributed to two primary factors: effective corporate strategies that blunted the margin impact of tariffs and a weaker U.S. dollar providing a favorable tailwind for translating international revenues.

Key Decisions for Investors

• The broad-based earnings beat suggests underlying corporate fundamentals are stronger than previously priced into the market, potentially justifying a re-evaluation of underweight positions in US equities.
• Investors should scrutinize companies that demonstrated superior tariff mitigation and foreign exchange management, as these capabilities may be a key differentiator for continued outperformance.
• Given the positive surprise, it is crucial to monitor whether the tailwinds from a weaker dollar and successful tariff management are sustainable, as any reversal in these trends could temper future earnings expectations.