15 Most Profitable Companies From Goldman Sachs

• Wall Street expects companies to post smaller profits as the economy slows and inflation persists.
• Earnings projections have dipped even though recent quarterly reports have been relatively strong.
• David Kostin of Goldman Sachs rounded up the companies expected to report the best profit growth.

Investors are probably cheering up after stocks staged a powerful rally over the last month that reduced their losses from earlier in the year. But according to Goldman Sachs, it’s too soon to break out the champagne.

“Whether or not the economy tips into a recession, consensus earnings forecasts remain too optimistic and profit margins for the median S&P 500 company will likely decline next year,” Goldman Sachs Chief US Equity Strategist David Kostin wrote in a recent note to clients.

In early July, Kostin wrote that he expects S&P 500 companies to earn $226 per share for the year, up 8% from the year before. At the time the Wall Street consensus was $229 a share, and it’s since dipped to match Kostin’s projections, according to FactSet. 

Goldman Sachs expects the benchmark index to end the year at 4,300, which, according to FactSet estimates, is a bit more pessimistic than the Street consensus of 4,442.

Analysts and experts are expecting slightly smaller profits for corporate America due to factors like the slowing economy and persistent inflation, but they’re still counting on a continued rally for equities. The S&P 500 would have to climb another 7% to reach the consensus target.

Considering the S&P 500 kicked off 2022 at 4,796, that would still leave stocks solidly in the red for the year — but a 7% decline by the end of the year is a lot more tolerable than the 20% decline investors experienced from January to June.

And while that earnings growth forecast doesn’t look great, Kostin analyzed the components of the S&P 500 based on their expected 2022 earnings growth. He found 15 companies that are poised to out-earn their peers this year, and all 15 of those stocks are ranked below from lowest to highest based on consensus earnings estimates. It’s notable that energy company earnings are expected to more than double in 2022, while industrial sector profits are expected to surge 33%.

Consensus figures below are current as of July 5.