First Decrease in EPS Estimates for S&P 500 Companies for Q1 2022 Since Q2 2020

During the month of January, analysts decreased earnings estimates for companies in the S&P 500 for the first quarter. The Q1 bottom-up EPS estimate (which is an aggregation of the median EPS estimates for Q1 for all the companies in the index) decreased by 0.7% (to $51.86 from $52.22) during this period. How significant is a 0.7% decrease in the bottom-up EPS estimate during the first month of a quarter? How does this decrease compare to recent quarters?

Smaller-Than-Average Decline in the Bottom-Up EPS Estimate for the Index

In a typical quarter, analysts usually reduce earnings estimates during the first month of the quarter. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 1.3%. During the past 10 years (40 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 1.9%. During the past 15 years (60 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 2.1%.

Thus, the decline in the bottom-up EPS estimate recorded during the first month of the first quarter was smaller than the five-year average, the 10-year average, and the 15-year average.

However, it should be noted that the first quarter also marked the first decrease in the bottom-up EPS estimate during the first month of a quarter since Q2 2020 (-29.0%).

Seven Sectors Saw Declines in Their Bottom-Up EPS Estimates

At the sector level, four sectors recorded an increase in their bottom-up EPS estimate for Q1 during the first month of the quarter, led by the Energy (+5.9%) sector. On the other hand, seven sectors recorded a decline in their bottom-up estimate for Q1 during this period, led by the Industrials (-10.1%) sector.

January Drop in the S&P 500

As the bottom-up EPS estimate for the index decreased during the first month of the quarter, the value of the S&P 500 also decreased during this same period. From December 31 through January 31, the value of the index decreased by 5.3% (to 4515.55 from 4766.18). The first quarter marked just the second time in the past 20 quarters in which both the bottom-up EPS estimate for the index and the value of the index decreased during the first month of a quarter.

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