Analysts Made Smaller Cuts Than Average to EPS Estimates for S&P 500 Companies for Q1

Given concerns in the market about a possible economic slowdown or recession, have analysts lowered EPS estimates more than normal for S&P 500 companies for the first quarter?

The answer is no. During the first quarter, analysts lowered EPS estimates for the quarter by a smaller margin than average. 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 2.5% (to $54.94 from $56.34) from December 31 to March 27.

In a typical quarter, analysts usually reduce earnings estimates during a quarter. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 3.7%. During the past ten years, (40 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 3.4%. During the past fifteen years, (60 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 3.7%. During the past 20 years (80 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 3.9%.

Thus, the decline in the bottom-up EPS estimate recorded during 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, seven of the eleven sectors witnessed a decrease in their bottom-up EPS estimate for Q1 2024 from December 31 to March 27, led by the Materials (-13.0%) and Energy (-12.3%) sectors. On the other hand, four sectors recorded an increase in their bottom-up EPS estimate for Q1 2024 during this period, led by the Communication Services (+2.2%) sector.

While the bottom-up EPS estimate for Q1 2024 declined by 2.5% during the first quarter, the bottom-up EPS estimate for CY 2024 decreased by 0.4% (to $243.60 from $244.47) during this same period.

Analysts also usually reduce earnings estimates for the year during the first three months of the year. During the past five years, the average decline in the annual bottom-up EPS estimate during the first three months of the year has been 2.0%. During the past ten years, the average decline in the annual bottom-up EPS estimate during the first three months of the year has been 1.6%. During the past fifteen years, the average decline in the annual bottom-up EPS estimate during the first three months of the year has been 2.5%. During the past 20 years, the average decline in the annual bottom-up EPS estimate during the first three months of the year has been 2.1%. During the past 25 years, the average decline in the annual bottom-up EPS estimate during the first three months of the year has been 2.3%.

Thus, the decline in the CY 2024 bottom-up EPS estimate recorded during the first three months of 2024 was smaller than the 5-year average, the 10-year average, the 15-year average, the 20-year average, and the 25-year average for the first three months of a year.

At the sector level, six sectors witnessed a decrease in their bottom-up EPS estimate for CY 2024 from December 31 to March 27, led by the Energy (-7.8%) and Materials (-5.0%) sectors. On the other hand, five sectors recorded an increase in their bottom-up EPS estimate for CY 2024 during this period, led by the Communication Services (+2.2%) and Information Technology (+1.8%) sectors.

It is interesting to note that while the bottom-up EPS estimate for CY 2024 declined by 0.4% during the first three months of the year, the bottom-up EPS estimate for CY 2025 increased by 0.3% (to $276.14 from $275.19) during this same period.

The FactSet Earnings Insight report is being published one day early on March 28. The next edition of the report will also be published on Friday, April 5.

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