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Highest cuts to earnings estimates for S&P 500 Energy sector since 2009

Earnings

By FactSet Insight  |  December 8, 2014

As the price of crude oil has continued to decline during the fourth quarter (to $66.81 Friday from $91.16 on September 30), analysts have also continued to lower earnings estimates for companies in the Energy sector in the S&P 500 for the fourth quarter. The Q4 bottom-up EPS estimate (which is an aggregation of the estimates for all the companies in the Energy sector) has dropped by 20.5% (to $9.49 from $11.94) since September 30. How significant is a 20.5% decline in the bottom-up EPS estimate for the Energy sector? How does this decrease compare to recent quarters?

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During the past year (4 quarters), the average decline in the bottom-up EPS estimate for the Energy sector for the quarter has been 4.3%. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate for the Energy sector has been -0.1%. During the past ten years, (40 quarters), the average increase in the bottom-up EPS estimate for the Energy sector for the quarter has been 0.7%. Thus, the decline in the bottom-up EPS estimate for the Energy sector to date is already higher than the 1-year, 5-year, and 10-year averages for an entire quarter.

In fact, if the final decline in the estimate is 20.5%, it will mark the largest decline in the EPS estimate for the Energy sector during a quarter since Q1 2009. In Q1 2009, the bottom-up EPS estimate for the Energy sector fell by 42.0% during the course of the quarter (to $5.37 from $9.26). Over this same period, the price of crude oil actually increased by 11.3% (to $49.66 from $44.60). During the previous six months (from June 30, 2008 to December 31, 2008), however, the price of crude oil had fallen by 68% (to $44.60 from $140.00).

Since September 30, the price of the Energy sector has dropped by 9.4% (to $598.67 from $661.05). This is the largest decline in price for all ten sectors during this period.

  

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