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?
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%).
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.
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.
Listen to Earnings Insight on the go! In our weekly Earnings Insight podcast, John Butters provides an update on S&P 500 corporate earnings and related topics based on his popular Earnings Insight publication. The podcast is made available every Monday—listen on Apple podcasts, Spotify, or factset.com.
The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.