Earnings estimates for the next 12 months are rising.
And earnings estimates for 2025 and 2026 have been coming down.
The above statements sound like they’re in conflict. But they are actually two ways of communicating the same information. The differentiating factor: The passage of time.
We often hear analysts talk about earnings estimates based on calendar years. For example, coming into this year Wall Street strategists presented their estimates for 2025 earnings.
However, time can pass quickly. And with calendar year estimates, what was once a discussion about future earnings can quickly become a discussion about past earnings.
For example, at the beginning of the year, 2025 earnings represented the next-12 months’ (NTM) earnings. But it’s April now, which means any discussion of 2025 earnings involves an old quarter, and any discussion of NTM earnings involves a quarter in 2026.
Morgan Stanley’s Michael Wilson shared a nice side-by-side visualization of this somewhat confusing dynamic. The chart on the left shows the S&P 500’s NTM earnings per share (EPS). As time passes, you can see NTM EPS move up as it continuously incorporates the higher earnings expected in future periods.
The chart on the right shows EPS estimates for 2025 and 2026 — static periods in time. As time passes, you can see how analysts’ estimates have moved lower in recent months.
NTM earnings estimates look good despite calendar year estimates coming down. (Source: Morgan Stanley)
“NTM EPS estimates continue to advance on the back of stronger 2026 EPS growth,” Wilson observed. “However, NTM EPS may show signs of flattening in recent weeks as 2025/2026 estimates revise slightly lower (-1%).”
To be clear, both charts employ the same analysts’ estimates for earnings. They just differ in the way they reflect the effect of the passage of time.
And the two charts are currently telling us that the promise of earnings growth on a rolling future basis is more than offsetting deteriorating expectations for static periods.
But again, both visualizations are working off the same estimates. So if we believe the estimates for E is off, discussions about both NTM and calendar year estimates will similarly be off.
The bottom line: Be mindful about what you read and hear about earnings estimates. While it can be helpful to know what’s going on with revisions in certain calendar years, the information for a particular year will become less relevant as time passes. This is why it’s arguably more useful to look to NTM earnings because stock prices are heavily determined by expectations for the future.
There were several notable data points and macroeconomic developments since our last review:
🛍️ Shopping ticks higher. Retail sales increased 1.4% in March to a record $734.9 billion.
Unfortunately, there’s evidence that recent spending has been boosted by consumers front-running tariffs. The 5.3% jump in car and car parts sales is in line with this trend. From Renaissance Macro’s Neil Dutta: “It’s challenging to get a proper signal from retail sales data at the moment. Households are taking tariffs seriously and we have seen a front running of activity, particularly in consumer durables. Ultimately, follow underlying growth. It’s been softening.”
💳 Card spending data is holding up. From JPMorgan: “As of 10 Apr 2025, our Chase Consumer Card spending data (unadjusted) was 3.0% above the same day last year. Based on the Chase Consumer Card data through 10 Apr 2025, our estimate of the US Census April control measure of retail sales m/m is 0.50%.”
(Source: JPMorgan)
From BofA: “Total card spending per HH was up 2.3% y/y in the week ending Apr 12, according to BAC aggregated credit & debit card data. Among the categories we show, the biggest gains relative to last week were in entertainment, online electronics & grocery. The increase could be due to a dual boost from upcoming Easter and front-loading due to tariff uncertainty.”
(Source: BofA)
Similar to March retail sales, April spending is likely being boosted by consumers pulling forward purchases in an attempt to front-run tariffs.
💼 Unemployment claims tick lower. Initial claims for unemployment benefits declined to 215,000 during the week ending April 12, down from 224,000 the week prior. This metric continues to be at levels historically associated with economic growth.
⛽️ Gas prices tick lower. From AAA: “As spring break travel winds down, gas prices are following suit, down five cents since last week. Softer demand is fueling this downward trend, and with crude as low as it’s been in a few years, drivers may continue to see lower pump prices as summer approaches.”
👎 Inflation expectations heat up. From the New York Fed’s March Survey of Consumer Expectations: “Median inflation expectations increased by 0.5 percentage point to 3.6% at the one-year-ahead horizon, were unchanged at 3.0% at the three-year-ahead horizon, and decreased by 0.1 percentage point to 2.9% at the five-year-ahead horizon.”
👎 New York area managers are worried about the future. From the NY Fed’s Empire State Manufacturing Survey: “Firms expect conditions to worsen in the months ahead, a level of pessimism that has only occurred a handful of times in the history of the survey. The index for future general business conditions fell twenty points to -7.4; the index has fallen a cumulative forty-four points over the past three months. New orders and shipments are expected to fall slightly in the months ahead. Capital spending plans were flat. Input and selling price increases are expected to pick up, and supply availability is expected to worsen over the next six months.”
From the NY Fed’s Business Leaders Survey: “After plunging twenty-five points last month, the index for future business activity sank another twenty-three points to -26.6, its lowest reading since April 2020, indicating that firms expect a significant decline in activity in the months ahead. The index for the future business climate also fell twenty-three points, to -50.0, marking its lowest level since 2009 and suggesting the business climate is expected to remain considerably worse than normal. The future employment index turned negative. The future supply availability index dropped to -36.1, with 44 percent of firms expecting supply availability to be worse in six months. Capital spending plans turned sharply negative.”
🔨 New home construction starts fall. Housing starts fell 11.4% in March to an annualized rate of 1.32 million units, according to the Census Bureau. Building permits ticked up 1.6% to an annualized rate of 1.48 million units.
🏠 Homebuilder sentiment ticks up. From the NAHB’s Buddy Hughes: “The recent dip in mortgage rates may have pushed some buyers off the fence in March, helping builders with sales activity. At the same time, builders have expressed growing uncertainty over market conditions as tariffs have increased price volatility for building materials at a time when the industry continues to grapple with labor shortages and a lack of buildable lots.”
🏠 Mortgage rates rise. According to Freddie Mac, the average 30-year fixed-rate mortgage increased to 6.83% from 6.62% last week. From Freddie Mac: “The 30-year fixed-rate mortgage ticked up but remains below the 7% threshold for the thirteenth consecutive week. At this time last year, rates reached 7.1% while purchase application demand was 13% lower than it is today, a clear sign that this year’s spring homebuying season is off to a stronger start.”
😬 This is the stuff pros are worried about. According to BofA’s April Global Fund Manager Survey: “Trade war triggering a global recession is viewed as the biggest ‘tail risk’ according to 80% of investors, the largest concentration for a ‘tail risk’ in 15-year history.”
Actions speak louder than words: We are in an odd period given that the hard economic data has decoupled from the soft sentiment-oriented data. Consumer and business sentiment has been relatively poor, even as tangible consumer and business activity continue to grow and trend at record levels. From an investor’s perspective, what matters is that the hard economic data continues to hold up.
Think long term: For now, there’s no reason to believe there’ll be a challenge that the economy and the markets won’t be able to overcome over time. The long game remains undefeated, and it’s a streak long-term investors can expect to continue.
