Fourth Largest Increase in EPS Estimates for S&P 500 Companies Since 2009 for Q3

During the first two months of the third quarter, analysts increased earnings estimates for companies in the S&P 500 for the quarter. The Q3 bottom-up EPS estimate (which is an aggregation of the median EPS estimates for Q3 for all the companies in the index) increased by 3.8% (to $49.31 from $47.50) during this period. How significant is a 3.8% increase in the bottom-up EPS estimate during the first two months of a quarter? How does this increase compare to recent quarters?

In a typical quarter, analysts usually reduce earnings estimates during the first two months of the quarter. 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 2.4%. 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 3.0%. During the past 15 years (60 quarters), the average decline in the bottom-up EPS estimate during the first two months of a quarter has been 3.6%.

In fact, the third quarter marked the fourth-largest increase in the bottom-up EPS estimate during the first two months of a quarter since 2009. It also marked the fifth straight quarter in which the bottom-up EPS estimate increased during the first two months of the quarter. However, the third quarter is also the first quarter during this current streak in which the percentage increase in the bottom-up EPS estimate was smaller than the previous quarter.

At the sector level, eight sectors recorded an increase in their bottom-up EPS estimate for Q3 during the first two months of the quarter, led by the Energy (+21.1%) and Materials (+12.1%) sectors. On the other hand, three sectors recorded a decline in their bottom-up estimate for Q3 during this period, led by the Consumer Discretionary (-3.9%) sector.

As the bottom-up EPS estimate for the index increased during the first two months of the quarter, the value of the S&P 500 also increased during this same period. From June 30 through August 31, the value of the index increased by 5.2% (to 4522.68 from 4297.50). The third quarter marked the seventh time in the past 20 quarters (five years) in which both the bottom-up EPS estimate for the index and the value of the index increased during the first two months of a quarter.

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