Largest Drop in S&P 500 EPS Estimate Over First Two Months of a Quarter since Q1 2009

During the first two months of Q1 2016, analysts lowered earnings estimates for companies in the S&P 500 for the quarter. The Q1 bottom-up EPS estimate (which is an aggregation of the estimates for all the companies in the index) dropped by 8.4% (to $26.69 from $29.13) during this period. How significant is an 8.4% decline in the bottom-up EPS estimate during the first two months of a quarter? How does this decrease compare to recent quarters?

During the past year (four quarters), the average decline in the bottom-up EPS estimate during the first two months of a quarter has been 3.8%. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during the first two months of a quarter has been 2.8%. During the past ten years, (40 quarters), the average decline in the bottom-up EPS estimate during the first two months of a quarter has been 3.6%. Thus, the decline in the bottom-up EPS estimate recorded during the first two months of the first quarter was larger than the 1-year, 5-year, and 10-year averages.

In fact, this was the largest percentage decline in the bottom-up EPS estimate over the first two months of a quarter since Q1 2009 (-24.0%).

As the bottom-up EPS estimate declined during the first two months of the quarter, the value of the S&P 500 also decreased during this same time frame. From December 31, 2015 through February 29, the value of the index decreased by 5.5% (to 1932.23 from 2043.94). This marked only the fifth time in the past 20 quarters in which both the bottom-up EPS estimate and the value of the index decreased during the first two months of the quarter.

At the sector level, the Energy sector by far has recorded the largest percentage decline in the bottom-up EPS to date at 93.3% (to $0.20 from $2.97). If this is the final percentage decline for the quarter, it will mark the largest percentage decrease in the bottom-up EPS estimate for the Energy sector for an entire quarter since FactSet began tracking the data in 2002. As of now, the largest percentage decrease in the bottom-up EPS estimate for the Energy sector for an entire quarter is -50.2% (to $4.17 from $8.38), which occurred in Q1 2015.