Few S&P 500 Companies Have issued EPS Guidance Since Harvey Hit U.S.

For the third quarter, 75 companies in the S&P 500 have issued negative EPS guidance and 43 companies in the S&P 500 have issued positive EPS guidance. While the number of companies issuing negative EPS is slightly below the five-year average (79), the number of companies issuing positive EPS guidance is well above the five-year average (27). If 43 is the final number for the quarter, it will mark a tie (with Q4'10) for the third highest number of S&P 500 companies issuing positive EPS guidance since FactSet began tracking EPS guidance in 2006. The unusually high number of companies issuing positive EPS guidance can be attributed in part to the unusually high number of S&P 500 companies issuing positive revenue guidance. 

However, given the loss of business and property damage caused by Hurricanes Harvey and Irma, why is the positive EPS guidance number above average and the negative EPS guidance number below average for the third quarter?

This dichotomy can be attributed to the date the EPS guidance was issued by most of these companies. Nearly all of the S&P 500 companies that have issued EPS guidance to date for the third quarter issued the guidance before the hurricanes hit the U.S. Of the 118 S&P 500 companies that have issued EPS guidance for Q3 2017, only six (or 5%) have issued EPS guidance since Hurricane Harvey first hit the U.S. on August 25.

Why Have So Few S&P 500 Companies Issued EPS Guidance in Recent Weeks?

One reason is normal seasonality. Over the past five third quarters, 101 S&P 500 companies on average have issued EPS guidance for the third quarter. Of these 101 companies, 88 on average issued EPS guidance prior to September 1. Only 13 S&P 500 companies on average have issued EPS guidance for the third quarter after September 1. Only 6 S&P 500 companies on average have issued EPS guidance for the third quarter during the month of September. Thus, many S&P 500 companies may be continuing their normal practice of not issuing EPS guidance for the third quarter after

S&P 500 companies may also still be trying to quantify the impact of the hurricanes on their bottom line. Three of the six companies that have issued EPS guidance since August 25 directly addressed the hurricanes. However, two of these three companies (Hewlett Packard Enterprise and Best Buy) stated that it was too early to provide an estimate of the impact. Thus, S&P 500 companies may provide more EPS guidance at a later time once the impact of the property damage and lost business can be quantified.

What Companies are Saying 

“Also, as Meg mentioned, Hurricane Harvey has had a substantial impact to our Houston operations. Our top priority has been ensuring the well-being of our employees during this challenging time. From a business perspective, we're continuing to assess the impact. Fortunately, we have a limited amount of production in Houston, which we've been able to mostly shift to other locations, so we don't expect a disruption to our customer deliveries. Of course, we will bear an uninsured cost associated with lost inventory or repairs to our campus, but have not incorporated anything into our outlook at this time.” –Hewlett Packard Enterprise (September 5)

“CooperSurgical's Q4 revenue guidance is $117 million to $120 million, or roughly 3% to 6% pro forma. Regarding non-GAAP EPS, we're guiding to $2.60 to $2.70 off a roughly 9.5% effective tax rate. Within this guidance is an assumption the severe flooding in Texas negatively impacts CooperVision revenue by $2 million, CooperSurgical's revenue by $1 million, and EPS by roughly $0.03.” –Cooper Companies (August 31)

“Before I talk about our guidance, I wanted to address the ongoing storms in Texas. With Harvey continuing to do damage in the area, coupled with the unknown recovery time, it is nearly impossible to predict the impact this could have on our business at this time. We continue to monitor the situation, first and foremost, the safety of our people in the area and, secondarily, for the potential impact on our results. Should it be required, we will provide further updates on the business impact.” –Best Buy (August 29)

The term “guidance” (or “preannouncement”) is defined as a projection or estimate for EPS (or sales) provided by a company in advance of the company reporting actual results. Guidance is classified as negative if the estimate (or mid-point of a range estimates) provided by a company is lower than the mean EPS (sales) estimate the day before the guidance was issued. Guidance is classified as positive if the estimate (or mid-point of a range of estimates) provided by the company is higher than the mean EPS (sales) estimate the day before the guidance was issued.