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During the second quarter, analysts lowered earnings estimates for companies in the S&P 500 for the quarter. The Q2 bottom-up EPS estimate (which is an aggregation of the estimates for all the companies in the index) dropped by 2.3% (to $28.72 from $29.39) during this period. How significant is a 2.3% decline in the bottom-up EPS estimate during a quarter? How does this decrease compare to recent quarters?

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During the past year (four quarters), the average decline in the bottom-up EPS estimate during a quarter has been 5.0%. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 3.4%. During the past 10 years, (40 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 5.0%. Thus, the decline in the bottom-up EPS estimate recorded during the second quarter was lower than the 1-year, 5-year, and 10-year averages. 

Why was the decline in the bottom-up EPS estimate for the quarter lower than average? At the sector level, the Energy sector reported the largest increase in the bottom-up EPS estimate for Q2 2015 of all 10 sectors during the quarter. This marks a sharp contrast to last quarter, when the Energy sector recorded the largest decrease in the bottom-up EPS estimate of all 10 sectors.

The bottom-up EPS estimate for Q2 2015 for the Energy sector increased by 9.4% (to $4.50 from $4.11) during the second quarter. Over this same time frame, the price of crude oil increased by 20.5% (to $59.47 from $47.60). 

Despite the increase in estimated earnings during the quarter, the Energy sector is still predicted to report the largest year-over-year decline in earnings (-60.0%) of all 10 sectors.

Read more about earnings trends in this edition of FactSet Earnings Insight. Visit www.factset.com/earningsinsight to launch the latest report.

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Senior Earnings Analyst
John’s weekly research report, Earnings Insight provides analysis and commentary on trends in corporate earnings data for the S&P 500, including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, Financial Times, The New York Times, MarketWatch, and Yahoo! Finance.

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