Let’s take a break from what’s happening now or what could happen the rest of this year and consider where things could be farther out.
In his mid-year outlook note published earlier this month, Morgan Stanley’s Mike Wilson offered a glimpse of what he’s expecting in 2028.
“We see 2026 EPS of $339 (23% growth), 2027 EPS of $380 (12% growth), and 2028 EPS of $429 (13% growth),” Wilson wrote (emphasis added).
This is encouraging for investors because earnings are the most important long-term driver of stock prices.
Wilson’s 2028 estimate isn’t too far from the consensus, which calls for earnings to grow 12% year over year to $427 per share.
“Positive operating leverage, AI adoption/’run it lean,’ improving pricing power, and an AI capex cycle that continues to show momentum are key drivers of our constructive view on earnings,” Wilson said.
Admittedly, no one can be expected to nail what’ll happen two to three years from now.
But it’s worth giving it a shot, especially since so much of a stock’s value comes from what the underlying company is expected to earn in the years ahead.
To his credit, Wilson has long been right about the positive operating leverage theme. Three years ago, he predicted that operating leverage — or the degree to which costs move with sales — would help drive profit margin expansion …