Sales: 866.322.8738Support: 877.322.8738
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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.

S&P-500-Change-in-Q217-EPS-vs-change-in-price

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.  

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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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