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.
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.