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Analysts Making Larger Cuts Than Average to EPS Estimates for S&P 500 Companies for Q4

Earnings

By John Butters  |  December 4, 2023

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 fourth quarter?

The answer is yes. During the months of October and November, analysts lowered EPS estimates for the fourth quarter by a larger margin than average. The Q4 bottom-up EPS estimate (which is an aggregation of the median EPS estimates for Q4 for all the companies in the index) decreased by 5.0% (to $54.95 from $57.86) from September 30 to November 30.

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 2.9%. 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 2.7%. 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 3.2%. 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 2.9%.

Thus, the decline in the bottom-up EPS estimate recorded during the first two months of the fourth quarter was larger than the 5-year average, the 10-year average, the 15-year average, and the 20-year average. In fact, this quarter marked the largest decrease in the bottom-up EPS estimate over the first two months of a quarter since Q1 2023 (-5.6%).

At the sector level, ten of the eleven sectors witnessed a decrease in their bottom-up EPS estimate for Q4 2023 from September 30 to November 30, led by the Health Care (-19.9%) sector. On the other hand, the Information Technology sector (+1.5%) is the only sector that recorded an increase in its bottom-up EPS estimate for Q4 2023 during this period.

It is interesting to note that while the bottom-up EPS estimate for Q4 2023 declined by 5% during the past two months, the bottom-up EPS estimate for CY 2024 declined by just 0.5% (to $246.30 from $247.66) during this same period.

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This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.

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John Butters

Vice President, Senior Earnings Analyst

Mr. John Butters is Vice President and Senior Earnings Analyst at FactSet. His 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, The Financial Times, The New York Times, MarketWatch, and Yahoo! Finance. Mr. Butters has over 15 years of experience in the financial services industry. Prior to FactSet in January 2011, he worked for more than 10 years at Thomson Reuters (Thomson Financial), most recently as Director of U.S. Earnings Research (2007-2010).

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The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.