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Analysts Are Not Raising Quarterly S&P 500 EPS Estimates for First Time Since Q2 2020

Earnings

By John Butters  |  December 6, 2021

During the first two months of the fourth quarter, upward and downward revisions to earnings estimates for companies in the S&P 500 have mostly offset each other in aggregate for the 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) decreased by less than 0.1% (to $51.04 from $51.06) during this period. How significant is a slight decrease in the bottom-up EPS estimate during the first two months of a quarter? How does this slight decrease compare to recent quarters?

change-in-sp500-quarterly-eps-first-two-months-of-quarter

The slim decline in the bottom-up EPS estimate for Q4 over the first two months of the quarter was much smaller than recent historical averages. 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 2.1%. During the past 10 years (40 quarters), the average decline in the bottom-up EPS estimate during the first two months of a quarter has been 2.9%. During the past 15 years (60 quarters), the average decline in the bottom-up EPS estimate during the first two months of a quarter has been 3.5%.

However, the fourth quarter did mark the first time the bottom-up EPS estimate has not increased over the first two months of a quarter since Q2 2020 (-35.9%).

Sector Analysis

At the sector level, six sectors recorded a decline in their bottom-up EPS estimates for Q4 during the first two months of the quarter, led by the Consumer Discretionary (-13.4%) and Industrials (-11.6%) sectors. On the other hand, five sectors recorded an increase in their bottom-up EPS estimates for Q4 during this period, led by the Energy (+39.5%) sector.

sp500-sector-level-change-in-q421-eps

As the bottom-up EPS estimate for the index decreased during the first two months of the quarter, the value of the S&P 500 increased during this same period. From September 30 through November 30, the value of the index increased by 6.0% (to 4567.00 from 4307.54). The fourth quarter marked the ninth time in the past 20 quarters (five years) in which the bottom-up EPS estimate for the index decreased over the first two months of the quarter while the value of the index increased during this period.

sp500-q421-bottom-up-eps-sep-30-nov-30

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The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.

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John Butters

Vice President, Senior Earnings Analyst

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).

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