Analysts Lowering Quarterly EPS Estimates for First Time Since Q2 2025

Given concerns in the market about inflation, tariffs, and AI, have analysts lowered EPS estimates for S&P 500 companies for the first quarter?

The answer is yes. During the months of January and February, analysts reduced EPS estimates for the first quarter. The Q1 bottom-up EPS estimate (which is an aggregation of the median EPS estimates for Q1 for all the companies in the index) decreased by 1.5% (to $70.50 from $71.57) from December 31 to February 26.

This marks the first time that analysts have decreased EPS estimates in aggregate during the first two months of a quarter since Q2 2025 (-4.0%).

In a typical quarter, analysts usually reduce earnings estimates during the first two months of a quarter. 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 1.2%. During the past ten years, (40 quarters), the average decline in the bottom-up EPS estimate during the first two months of a quarter has been 2.4%. During the past fifteen years, (60 quarters), the average decline in the bottom-up EPS estimate during the first two months of a quarter has been 2.6%. During the past 20 years (80 quarters), the average decline in the bottom-up EPS estimate during the first two months of a quarter has been 3.2%.

Thus, the decline in the bottom-up EPS estimate recorded during the first two months of the first quarter was smaller than the 5-year average, the 10-year average, the 15-year average, and the 20-year average.

At the sector level, eight of the eleven sectors witnessed a decrease in their bottom-up EPS estimate for Q1 2026 from December 31 to February 26, led by the Health Care (-13.2%) and Energy (-12.3%) sectors. On the other hand, two sectors recorded an increase in their bottom-up EPS estimate for Q1 2026 during this period, led by the Information Technology (+5.2%) sector. One sector (Utilities) recorded no change (0%) in its bottom-up EPS estimate for Q1 2026 during this timeframe.

However, it is important to note that while analysts lowered EPS estimates for S&P 500 companies for Q1 2026 over the past two months, they also increased EPS estimates for S&P 500 companies for the remaining three quarters of 2026 during this same period. The bottom-up EPS estimate for Q2 2026 increased by 0.7% (to $76.78 from $76.26) during the past two months. The bottom-up EPS estimate for Q3 2026 increased by 1.2% (to $82.39 from $81.38) during the past two months. The bottom-up EPS estimate for Q4 2026 increased by 2.2% (to $85.18 from $83.35) during the past two months.

As a result, analysts also increased earnings estimates for 2026 during the past two months. From December 31 through February 26, the CY 2026 bottom-up EPS estimate increased by 0.8% (to $313.62 from $311.25).

At the sector level, six sectors witnessed an increase in their bottom-up EPS estimate for CY 2026 from December 31 to February 26, led by the Information Technology (+4.1%) and Materials (+2.9%) sectors. On the other hand, five sectors recorded a decrease in their bottom-up EPS estimate for CY 2026 during this period, led by the Energy (-6.5%) and Health Care (-2.3%) sectors.

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