EPS guidance numbers for S&P 500 trend positive for 2nd straight quarter

Since hitting a peak in negative EPS guidance in Q4 2013, companies in the S&P 500 have issued fewer negative EPS preannouncements and more positive EPS preannouncements for the second consecutive quarter. For Q2 2014, 84 companies have issued negative EPS guidance and 27 companies have issued positive EPS guidance. The number of negative preannouncements is below the record high of 95 set in Q4 2013, and the number of positive preannouncements is above the record low of 17 also set in Q4 2013. If these are the final numbers for the quarter, it will mark the lowest number of negative EPS preannouncements since Q4 2012 (79) and the highest number of positive preannouncements since Q4 2012 (34).

At the sector level, four sectors have led the positive trend in EPS guidance for the index since Q4 2013: Information Technology, Health Care, Industrials and Materials. The Information Technology (-7) has seen the largest decline in the number of companies issuing negative EPS guidance since Q4 2013, followed by the Industrials (-3), Materials (-3), and Health Care (-2) sectors. The Information Technology (+7) sector has also witnessed the largest increase in the number of companies issuing positive EPS guidance since Q4 2013, followed by the Health Care (+4), Industrials (+2), and Materials (+2) sectors.

On the other end of the spectrum, the Consumer Discretionary and Financials sectors have bucked the overall positive trend. These two sectors (along with the Utilities sector) are tied for the largest increase in the number of companies issuing negative EPS guidance since Q4 2013 at two. The Consumer Discretionary sector has recorded the largest decrease in the number of companies issuing positive EPS guidance since Q4 2013 at three, followed by the Financials sector at two.

Despite the positive shift in EPS guidance for Q2, it is important to note that these EPS guidance numbers for the S&P 500 as a whole are still well above the five-year average for the number of companies issuing negative EPS guidance (70) for a quarter, and well below the 5-year average for the number of companies issuing positive EPS guidance (37) for a quarter.

At the sector level, the Consumer Discretionary sector has not only witnessed the largest increase in the number of companies issuing negative EPS guidance (+9) relative to its five-year average, but also has seen the largest decrease in the number of companies issuing positive EPS guidance (-7) for the quarter relative to its five-year average.

The percentage of companies issuing negative EPS guidance for Q2 2014 is 76% (84 out of 111). If this is the final percentage for the quarter, it will mark the sixth highest percentage of companies issuing negative EPS guidance for a quarter since FactSet began tracking the data in 2006. However, the five quarters ahead of the Q2 2014 in terms of the highest percentages of negative preannouncements for a quarter are the previous five quarters (Q113 – Q114). Thus, if 76% is the final percentage for Q2, it will also mark the lowest percentage of negative EPS guidance for a quarter since Q4 2012 (70%).