Smallest Cuts to S&P 500 EPS Estimates for Q2 since 2014

During the first two months of the second quarter, analysts lowered earnings estimates for companies in the S&P 500 for the quarter. The Q2 bottom-up EPS estimate (which is an aggregation of the EPS estimates for all the companies in the index) dropped by 1.7% (to $31.58 from $32.13) during this period. How significant is a 1.7% 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 2.5%. 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 3.5%. 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 4.2%. Thus, the decline in the bottom-up EPS estimate recorded during the first two months of the second quarter was smaller than the one-year, five-year, and 10-year averages.

In fact, this marks the smallest decline in the bottom-up EPS estimate for the index for the first two months of a quarter since Q2 2014 (-1.0%).

Sector Breakdown

Seven sectors recorded a decline in their bottom-up EPS estimate during the first two months of the quarter that was smaller than the five-year average and the 10-year average for that sector. One sector that stands out from the pack in terms of below-average cuts to estimates is the Industrials sector. This sector recorded an increase in the bottom-up EPS estimate of 0.4% (to $7.73 from $7.71) during the first two months of the second quarter. This 0.4% increase is an improvement relative to the average decline of 3.7% over the past five years and the average decline of 3.7% over the past 10 years in the bottom-up EPS estimate for this sector during the first two months of the quarter.

As the bottom-up EPS estimate for the index declined during the first two months of the quarter, the value of the S&P 500 increased during this same period. From March 31 through May 31, the value of the index increased by 2.1% (to 2411.80 from 2362.72). This quarter marked the seventeenth 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 period.