Analysts Increased EPS Estimates for S&P 500 Companies for Record 5th Straight Quarter in Q3

During the third quarter, analysts increased earnings estimates for companies in the S&P 500 for the quarter. The Q3 bottom-up EPS estimate (which is an aggregation of the median EPS estimates for Q3 for all the companies in the index) increased by 2.9% (to $48.89 from $47.50) during this period. How significant is a 2.9% increase in the bottom-up EPS estimate during a quarter? How does this increase compare to recent quarters?

In a typical quarter, analysts usually reduce earnings estimates during the quarter. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 2.9%. During the past 10 years (40 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 3.7%. During the past 15 years (60 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 4.9%.

In fact, the third quarter marked the fifth straight quarter in which the bottom-up EPS estimate increased during the quarter, which is the longest streak of consecutive quarterly increases since FactSet began tracking this metric in 2002. The previous record was four straight quarters from Q3 2003 through Q2 2004. At the sector level, seven sectors recorded an increase in their bottom-up EPS estimate for Q3 during the quarter, led by the Energy (+23.1%) and Materials (+10.8%) sectors. On the other hand, four sectors recorded a decline in their bottom-up EPS estimate for Q3 during this period, led by the Consumer Discretionary (-5.2%) sector.

However, it should be noted that while the Q3 bottom-up EPS estimate increased by 3.8% during the first two months of the third quarter (to $49.31 from $47.50), it declined by 0.9% during the month of September (to $48.89 from $49.31). This is the largest monthly decrease in the quarterly bottom-up EPS estimate since June 2020 (-1.8%). Five sectors recorded a decrease in their Q3 bottom-up EPS estimate during the month of September, led by the Industrials sector (-8.1%).

As the bottom-up EPS estimate for the index increased during the quarter, the value of the S&P 500 also increased during this same period. From June 30 through September 30, the value of the index increased by 0.2% (to 4307.54 from 4297.50). The third quarter marked the sixth time in the past 20 quarters (five years) in which both the bottom-up EPS estimate for the index and the value of the index increased during the quarter.

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