During the first two months of the first quarter, analysts lowered earnings estimates for companies in the S&P 500 for the quarter. The Q1 bottom-up EPS estimate (which is an aggregation of the EPS estimates for all the companies in the index) dropped by 3.1% (to $29.61 from $30.56) during this period. How significant is a 3.1% decline in the bottom-up EPS estimate during the first two months of a quarter? How does this decrease compare to recent quarters?
During the past year (four quarters), the average decline in the bottom-up EPS estimate during the first two months of a quarter has been 3.7%. 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 3.3%. During the past 10 years, (40 quarters), the average decline in the bottom-up EPS estimate during the first two months of a quarter has been 3.9%. Thus, the decline in the bottom-up EPS estimate recorded during the first two months of the first quarter was smaller than the 1-year, 5-year, and 10-year averages.
One sector that contributed to the below average decline in the bottom-up EPS estimate for the S&P 500 over the past two months is the Energy sector. This sector recorded a decrease in the bottom-up EPS estimate of 2.4% (to $3.09 from $3.17) during the first two months of the quarter. This 2.4% decrease is much smaller than the average decline of 39.0% over the past year and the average decline of 13.6% over the past five years in the bottom-up EPS estimate for this sector for an entire quarter.
As the bottom-up EPS estimate declined during the first two months of the quarter, the value of the S&P 500 increased during this same time frame. From December 31 through February 28, the value of the index increased by 5.6% (to 2363.64 from 2238.83). This marked the 16th time in the past 20 quarters in which the bottom-up EPS estimate decreased during the first two months of the quarter while the value of the index increased over this same time frame.