Subscribe
Featured Image

Analysts Are Continuing to Raise Quarterly S&P 500 EPS Estimates in Q4

Earnings

By John Butters  |  November 9, 2020

During the month of October, analysts increased earnings estimates for companies in the S&P 500 for the fourth quarter. The Q4 bottom-up EPS estimate (which is an aggregation of the median EPS estimates for Q4 for all the companies in the index) increased by 1.8% (to $36.72 from $36.08) during this period. How significant is a 1.8% increase in the bottom-up EPS estimate during the first month of a quarter? How does this increase compare to recent quarters?

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 2.6%. 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 2.2%. During the past 15 years (60 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 2.4%. Thus, while analysts typically lower EPS estimates during the first month of a quarter, they increased EPS estimates during the first month of Q4 2020.

Change in S&P 500 Quarterly EPS 1st month of Qtr

In fact, this marked just the third time since 2011 that the bottom-up EPS estimate increased over the first month of a quarter. Since 2011, the only two other quarters in which the bottom-up EPS estimate increased during the first month of the quarter are Q1 2018 (+4.9%) and Q2 2020 (+1.4%).

However, it should be noted that analysts made substantial cuts to EPS estimates for Q4 during the second quarter (March 31 to June 30). During this period, the Q4 bottom-up EPS estimate declined by 16.4% (to $36.58 from $43.71)

At the sector level, only three sectors recorded an increase in their bottom-up EPS estimate for Q4 during the first month of the quarter: Financials (+14.0%), Communication Services (+7.6%), and Materials (+6.3%). Seven sectors recorded a decline in their bottom-up estimate for Q4 during the first month of the quarter, led by the Energy (-84.4%) sector. However, the other six sectors witnessed declines of 4% or less. One sector saw no change during this time.

As the bottom-up EPS estimate for the index increased during the first month of the quarter, the value of the S&P 500 decreased during this same period. From September 30 through October 31, the value of the index decreased by 2.8% (to 3269.96 from 3363.00). This marked the first time since Q1 2010 in which the bottom-up EPS estimate for the index increased during the first month of a quarter while the value of the index decreased during this period.

S&P 500 Q420 Bottom Up EPS Sep 30-Oct 31

S&P 500 Q420 Bottom Up EPS Dec 31-Oct 31

Now you can listen to Earnings Insight on the go! In our new weekly Earnings Insight podcast, John Butters provides an update on S&P 500 corporate earnings and related topics based on his popular Earnings Insight publication. The podcast is made available every Monday—listen on Apple podcasts, Spotify, or factset.com.

Download the latest Earnings Insight

John Butters

Vice President, Senior Earnings Analyst, Investor Relations

Mr. John Butters is Vice President and Senior Earnings Analyst at FactSet. His 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, The Financial Times, The New York Times, MarketWatch, and Yahoo! Finance. Mr. Butters has over 15 years of experience in the financial services industry. Prior to FactSet in January 2011, he worked for more than 10 years at Thomson Reuters (Thomson Financial), most recently as Director of U.S. Earnings Research (2007-2010).

Comments