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.
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.