Are Analysts Cutting EPS Estimates More Than Average for S&P 500 Companies for Q3?

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 third quarter?

The answer is no. During the month of July, analysts lowered EPS estimates for the third quarter at average levels. The Q3 bottom-up EPS estimate (which is an aggregation of the median EPS estimates for Q3 for all the companies in the index) decreased by 1.8% (to $62.09 from $63.20) from June 30 to July 31.

In a typical quarter, analysts usually reduce earnings estimates during the first month of a quarter. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 1.8%. During the past ten years, (40 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has also been 1.8%. During the past fifteen years, (60 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 1.4%. During the past 20 years (80 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 1.8%.

Thus, the decline in the bottom-up EPS estimate recorded during the first month of the third quarter was equal to the 5-year average, the 10-year average, and the 20-year average. However, it was larger than the 15-year average.

At the sector level, ten sectors witnessed a decrease in their bottom-up EPS estimate for Q3 2024 from June 30 to July 31, led by the Energy (-6.6%), Industrials (-5.1%), and Health Care (-4.0%) sectors. On the other hand, the Utilities (+0.1%) sector is the only sector that recorded an increase in its bottom-up EPS estimate for Q3 2024 during this period.

It is interesting to note that while analysts lowered EPS estimates for Q3 2024 by 1.8% during the month of July, they lowered EPS estimates for CY 2025 by less than 0.1% (to $278.72 from $278.79) over this same period.

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