Have More S&P 500 Companies Issued Negative EPS Guidance for Q1 than Average?

Heading into the end of the first quarter, 105 S&P 500 companies have issued EPS guidance for the quarter. Of these 105 companies, 77 have issued negative EPS guidance and 28 companies have issued positive EPS guidance. The number of companies issuing negative EPS for Q1 is above the five-year average (74), while the number of companies issuing positive EPS guidance for Q1 is below the five-year average (32).

The percentage of companies issuing negative EPS guidance is 73% (77 out of 105). This percentage is above the five-year average of 70%, as more companies have issued negative EPS guidance than average and fewer companies have issued positive EPS guidance than average.

What is driving the above-average negative sentiment in EPS guidance for the first quarter?

At the sector level, the Information Technology and Health Care sectors are the main contributors to the above-average negative sentiment in EPS guidance for the first quarter.

In the Information Technology sector, 26 companies have issued negative EPS guidance for the first quarter, which is above the five-year average for the sector (20). If 26 is the final number for the quarter, it will mark the highest number of companies issuing negative EPS guidance in this sector since Q1 2016 (also 26). At the industry level, the Software (7) and Semiconductor & Semiconductor Equipment (6) industries have the highest number of companies issuing negative EPS guidance in the sector.

It is interesting to note that an unusually high number of companies in the Information Technology sector have also issued negative revenue guidance for the quarter. Overall, 31 companies in the sector have issued negative revenue guidance, which is above the five-year average (20). If 31 is the final number for the quarter, it will mark the highest number of companies issuing negative revenue guidance in this sector since Q4 2012 (36).

In the Health Care sector, 16 companies have issued negative EPS guidance for the first quarter, which is above the five-year average for the sector (10). If 16 is the final number for the quarter, it will mark the highest number of companies issuing negative EPS guidance in this sector since FactSet began tracking EPS guidance in 2006. At the industry level, the Health Care Equipment & Supplies (10) industry has the highest number of companies issuing negative EPS guidance in the sector.

Not only are the number of companies using negative EPS guidance in the Health Care sector unusually high, but the number of companies issuing positive EPS guidance in this sector is also unusually low. Overall, two companies in the Health Care sector have issued positive EPS guidance for the quarter, which is below the five-year average of five. If two is final number for the quarter, it will mark the lowest number of companies issuing positive EPS guidance in this sector since Q1 2014 (one).

The term “guidance” (or “preannouncement”) is defined as a projection or estimate for EPS 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 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 estimate the day before the guidance was issued.