Analysts Making Larger Cuts Than Average to EPS Estimates for S&P 500 Companies for Q1

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

The answer is yes. During the months of January and February, analysts lowered EPS estimates by a larger 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 3.5% (to $60.66 from $62.89) from December 31 to February 27.

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 2.6%. 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 also been 2.6%. 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 2.4%. 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 3.1%.

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

At the sector level, all eleven sectors have witnessed a decrease in their bottom-up EPS estimate for Q1 2025 from December 31 to February 27, led by the Materials (-16.2%) and Consumer Discretionary (-8.8%) sectors.

While the bottom-up EPS estimate for Q1 2025 declined by 3.5% during the months of January and February, analysts lowered EPS estimates for CY 2025 by 1.0% (to $271.28 from $274.12) during this same period.

Over longer periods, analysts also usually reduce earnings estimates for the year during the months of January and February. During the past five years, the average increase in the annual bottom-up EPS estimate during the first two months of the year has been 0.1%. During the past ten years, the average decline in the annual bottom-up EPS estimate during the first two months of the year has been 0.6%. During the past fifteen years, the average decline in the annual bottom-up EPS estimate during the first two months of the year has been 0.4%. During the past 20 years, the average decline in the annual bottom-up EPS estimate during the first two months of the year has been 1.5%. During the past 25 years, the average decline in the annual bottom-up EPS estimate during the first two months of the year has been 1.6%.

Thus, the decline in the CY 2025 bottom-up EPS estimate recorded during the first two months of 2025 was larger than the 5-year average, the 10-year average, the 15-year average for the first two months of a year, but smaller than the 20-year average and the 25-year average for the first two months of a year.

At the sector level, ten sectors witnessed a decrease in their bottom-up EPS estimate for CY 2025 from December 31 to February 27, led by the Materials (-9.1%) sector. On the other hand, the Financials (+1.1%) sector is the only sector that recorded an increase in its bottom-up EPS estimate for CY 2025 during this period.

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