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

With the first two months of the quarter completed, have analysts lowered EPS estimates more than normal for S&P 500 companies for the fourth quarter?

The answer is no. During the months of October and November, analysts lowered EPS estimates by a smaller margin compared to three of the four most recent averages. 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 2.5% (to $62.02 from $63.60) 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 2.7%. 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 2.7%. 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 2.3%. 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 fourth quarter was smaller than the 5-year average, the 10-year average, and the 20-year average. However, it should be noted that it was larger than the 15-year average.

At the sector level, nine of the eleven sectors witnessed a decrease in their bottom-up EPS estimate for Q4 2024 from September 30 to November 30, led by the Energy (-12.0%) and Materials (-11.0%) sectors. On the other hand, the Communication Services (+4.2%) sector is the only sector that recorded an increase in its bottom-up EPS estimate for Q4 2024 during this period.

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