Sales: 866.322.8738Support: 877.322.8738
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During the first two months of the quarter, 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 1.7% (to $33.26 from $33.84) 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 4.3%. Thus, the decline in the bottom-up EPS estimate recorded during the first two months of the third quarter was smaller than the one-year, five-year, and 10-year averages.

SP500-Change-in-Q317-EPS-vs-Change-in-price

The third quarter marked a tie with Q2 2017 (-1.7%) for the quarter with the smallest decline in the bottom-up EPS estimate for the first two months of a quarter since Q2 2014 (-1.0%).

Sector Level

At the sector level, 10 of the 11 sectors recorded a decline in their bottom-up EPS estimate during the first two months of the quarter. However, the Energy sector was the only sector that witnessed a decline in the bottom-up EPS estimate during this time that exceeded both the 5-year average and the 10-year average for the first two months of the quarter. This sector recorded a decrease in the bottom-up EPS estimate of 18.6% (to $3.51 from $4.31) during the months of July and August. The 5-year average decline for this sector for the first two months of the quarter is -11.7%, while the 10-year average decline for this sector for the same period is -7.0%.

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 June 30 through August 31, the value of the index increased by 2.0% (to 2471.65 from 2423.41). 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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