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

Written by John Butters | Dec 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?

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.

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.

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