During the month of April, 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 EPS estimates for all the companies in the index) dropped by 1.8% (to $28.90 from $29.43) during this period. How significant is a 1.8% decline in the bottom-up EPS estimate during the first month of a quarter? How does this decrease compare to recent quarters?
Related: Will S&P 500 Report Earnings Decline for Q1?
During the past year (four quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 2.8%. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 2.2%. During the past 10 years, (40 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 2.3%. Thus, the decline in the bottom-up EPS estimate recorded during the first month of the second quarter was smaller than the 1-year, 5-year, and 10-year averages.
As the bottom-up EPS estimate declined during the first month of the quarter, the value of the S&P 500 increased during this same time frame. From March 31 through April 27, the value of the index has increased by 0.8% (to 2075.81 from 2059.74). Assuming the market does not close at or below 2059.74 today, this month will mark the 10th time in the past 16 quarters in which the bottom-up EPS estimate decreased during the first month of a quarter while the value of the index increased during the first month of the quarter.
At the sector level, the Information Technology has recorded the largest percentage decline in the bottom-up EPS estimate for Q2 during the first month of the quarter at -9.4% (to $9.06 from $10.01). This sector has also recorded the largest decline in value of all 10 sectors over this time frame at -4.6% (to 703.04 from 737.12).