Sales: 866.322.8738Support: 877.322.8738
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During the month of July, analysts lowered earnings estimates for companies in the S&P 500 for the third quarter. The Q3 bottom-up EPS estimate (which is an aggregation of the EPS estimates for all the companies in the index) dropped by 1.2% (to $33.42 from $33.82) during this period. How significant is a 1.2% decline in the bottom-up EPS estimate during the first month of a quarter? How does this decrease compare to recent quarters?

SP-500-Changes-Q317-EPS-vs-Change-In-Price

During the past year (four quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 1.4%. 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 2.3%. During the past 10 years (40 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 2.5%. Thus, the decline in the bottom-up EPS estimate recorded during the first month of the third quarter was smaller than the one-year, five-year, and 10-year averages.

The third quarter marked a tie with Q4 2016 (-1.2%) for the second smallest decline in the bottom-up EPS estimate for the index for the first month of a quarter since Q2 2014 (-0.2%). The only quarter that recorded a smaller decline in the bottom-up EPS estimate over the first month of the quarter since Q2 2014 was last quarter (-0.8%).

Sector Analysis

At the sector level, seven of the 11 sectors recorded a decline in their bottom-up EPS estimates during the first month of the quarter that was smaller than the five-year average and the 10-year average for that sector.

The only sector that witnessed a decline in the bottom-up EPS estimate during this time that exceeded both the five-year average and the 10-year average for the first month of the quarter was the Energy sector. This sector recorded a decrease in the bottom-up EPS estimate of 17.3% (to $3.56 from $4.31) during the month of July. The five-year average decline for this sector for the first month of the quarter is -9.2%, while the 10-year average decline for this sector for the same period is -5.6%.

As the bottom-up EPS estimate for the index declined during the first month of the quarter, the value of the S&P 500 increased during this same period. From June 30 through July 31, the value of the index increased by 1.9% (to 2470.30 from 2423.41). This quarter marked the 13th time in the past 20 quarters in which the bottom-up EPS estimate decreased during the first month of the quarter while the value of the index increased over this same period.

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Senior Earnings Analyst
John’s weekly research report, Earnings Insight provides analysis and commentary on trends in corporate earnings data for the S&P 500, including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, Financial Times, The New York Times, MarketWatch, and Yahoo! Finance.

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