Did Analysts Cut EPS Estimates More Than Average for S&P 500 Companies for Q3?

Given concerns in the market about a possible economic slowdown, did analysts lower EPS estimates more than normal for S&P 500 companies for the third quarter?

The answer is yes. During the third quarter, analysts lowered EPS estimates in aggregate by a larger margin compared to recent averages. The Q3 bottom-up EPS estimate (which is an aggregation of the median EPS estimates for Q3 for all the companies in the index) declined by 3.9% (to $60.72 from $63.20) from June 30 to September 30.

In a typical quarter, analysts usually reduce earnings estimates during a quarter. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 3.3%. During the past ten years, (40 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 3.3%. During the past fifteen years, (60 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 3.2%. During the past 20 years (80 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 4.1%.

Thus, the decline in the bottom-up EPS estimate recorded during the third quarter was larger than the 5-year average, the 10-year average, and the 15-year average. However, it should be noted that it was still smaller than the 20-year average.

At the sector level, nine of the eleven sectors witnessed a decrease in their bottom-up EPS estimate for Q3 2024 from June 30 to September 30, led by the Energy (-19.2%) and Materials (-9.4%) sectors. On the other hand, the Information Technology (+0.3%) sector is the only sector that recorded a (slight) increase in its bottom-up EPS estimate for Q3 2024 during this period.

It is interesting to note that while analysts decreased EPS estimates in aggregate for Q3 2024 by nearly 4%, they lowered EPS estimates for CY 2025 by less than 1% (to $276.65 from $278.79) over this same period.

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