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S&P 500 Will Rise to 1,325 Next Year as Earnings Grow, UBS Says

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Dec. 2 (Bloomberg) -- The Standard & Poor’s 500 Index will climb 9.9 percent by the end of next year as revenue and economic growth boost earnings, according to UBS AG’s Jonathan Golub.

The benchmark gauge for U.S. equities will reach 1,325, representing an increase of almost 10 percent from yesterday’s closing level, with earnings expanding to $93 per share, the chief U.S. market strategist wrote in a note dated yesterday. Golub said he recommends technology, industrial and health-care stocks next year. He also said earnings in 2012 will increase to $101 a share.

“We have entered into a self-sustaining recovery,” Golub wrote. “Risks are weighted to the upside for both our earnings and valuation forecasts, giving U.S. equity markets the potential to have a truly great year in 2011.”

S&P 500 earnings have beat estimates every quarter this year and are forecast for the best annual growth rate in 22 years, according to Bloomberg data. Higher-than-projected profits and a commitment from Federal Reserve Chairman Ben S. Bernanke to boost the world’s largest economy by buying $600 billion of Treasuries have pushed stocks 8.2 percent higher this year, before today.

Golub estimates revenue will grow 5 percent to 7 percent, based on U.S. economic growth of 2.5 percent to 3 percent for 2011. He said that profit margins will continue to expand and that stocks will still be undervalued next year.

His 2011 forecast compares with Goldman Sachs Group Inc.’s 1,450 projection and Birinyi Associates Inc.’s 1,333 estimate, both announced today.

To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.

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