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Analysts Made Smaller Cuts than Average to S&P 500 EPS Estimates for Q2

Companies and Earnings

By John Butters  |  July 8, 2019

During the second quarter, analysts lowered earnings estimates for companies in the S&P 500 for the quarter. The Q2 bottom-up EPS estimate (which is an aggregation of the median EPS estimates of all the companies in the index for the second quarter) dropped by 2.6% (to $40.42 from $41.46) during this period. How significant is a 2.6% decline in the bottom-up EPS estimate during a quarter? How does this decrease compare to recent quarters?

During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 3.3%. During the past ten years, (40 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 3.1%. During the past fifteen years, (60 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 4.2%. Thus, the decline in the bottom-up EPS estimate recorded during the second quarter was smaller than the 5-year average, the 10-year average, and the 15-year average.

SP Change in Quarterly Bottom Up EPS

At the sector level, nine sectors recorded a decline in their bottom-up EPS estimate during the quarter, led by the Materials (-12.7%) and Industrials (-7.4%) sectors. On the other hand, two sectors recorded an increase in their bottom-up EPS estimate during the quarter, led by the Energy (+4.8%) sector. Overall, five sectors recorded a smaller decrease (or an increase) in their bottom-up EPS estimate relative to their 5-year average, six sectors recorded a smaller decrease (or an increase) in their bottom-up EPS estimate relative to their 10-year average, and six sectors recorded a smaller decrease (or an increase) in their bottom-up EPS estimate relative to their 15-year average.

SP 500 Cahnge in Q219 EPS vs Change in Price

As the bottom-up EPS estimate for the index declined during the quarter, the value of the S&P 500 increased during this same period. From March 31 through June 30, the value of the index increased by 3.8% (to 2941.76 from 2834.40). Thus, the second quarter marked the fifteenth time in the past 20 quarters in which the bottom-up EPS estimate decreased during the quarter while the value of the index increased during the quarter.

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John Butters

Senior Earnings Analyst

John’s 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, Financial Times, The New York Times, MarketWatch, and Yahoo! Finance.

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