Are Analysts Cutting EPS Estimates More Than Average for S&P 500 Companies for Q4?

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 no. During the month of October, analysts lowered EPS estimates for the fourth quarter at average levels. 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 1.8% (to $62.45 from $63.61) from September 30 to October 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 fourth quarter was equal to the 5-year average, the 10-year average, and the 20-year average. However, it was above the 15-year average.

At the sector level, nine sectors witnessed a decrease in their bottom-up EPS estimate for Q4 2024 from September 30 to October 31, led by the Energy (-8.5%), Industrials (-4.9%), and Health Care (-4.8%) sectors. On the other hand, two sectors recorded an increase in their bottom-up EPS estimates for Q4 2024 during this period: Communication Services (+3.5%) and Financials (+0.5%).

While analysts lowered EPS estimates for Q4 2024 by 1.8% during the month of October, the value of the index also decreased by 1.0% (to 5705.45 from 5762.48) over this same period.

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