Wall Street’s biggest earnings bull now sees profits falling this year

Deutsche Bank chief US equity and global strategist Binky Chadha was the biggest bull on Corporate America’s profit-generating abilities, expecting S&P 500 earnings per share to surge to $282 this year from $245 in 2024.

Now, he’s calling for an outright contraction in earnings per share as tariffs weigh on bottom-line results.

“With the potential impact of the announced tariffs large and likely to fall disproportionately on US companies, we lower our S&P 500 EPS estimate for 2025 from $282 to $240, implying a decline of -5% from last year,” Chadha wrote. “We quantify the impacts of various channels: foreign supplier ability to absorb tariffs; the importance of intra-company imports; price increases traded off against volume declines; lost earnings from China imports and exports; slower foreign growth; potential backlash on US sales abroad; and persistent uncertainty.”

He now sees the S&P 500 ending the year at 6,150, considerably lower than his prior call for 7,000. But in the near term, he sees the benchmark US stock index ranging between 4,600 and 5,600.

“While there have been several attempts at deescalation there has not been a credible relent on trade policy, while macro concerns have been mounting,” he wrote. “Further out, our base case remains for a significant rally on a credible relent on trade policies... A credible relent likely needs a significant decline in approval ratings.”

A downdraft in earnings estimates was predictable as a lagged response to the decline in the stock market, and we’ve seen earnings and price targets come under pressure lately. What’s noteworthy so far is that calendar year 2025 earnings estimates have come down 2.1% versus just a 1.1% drop for 12-month forward earnings estimates, suggesting that the analysts foresee a more front-loaded and somewhat temporary hit to profits in light of these new frictions for cross-border commerce.