Largest Cuts to S&P 500 EPS Estimates Since First Quarter of 2016

During the first quarter, analysts lowered earnings estimates for companies in the S&P 500 for the quarter. The Q1 bottom-up EPS estimate (which is an aggregation of the median EPS estimates of all the companies in the index) dropped by 7.2% (to $37.33 from $40.21) during this period. How significant is a 7.2% decline in the bottom-up EPS estimate during a quarter? How does this decrease compare to recent quarters?

During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 3.2%. During the past ten years, (40 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 3.7%. During the past fifteen years, (60 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 4.0%. Thus, the decline in the bottom-up EPS estimate recorded during the first quarter was larger than the 5-year average, the 10-year average, and the 15-year average.

In fact, the first quarter marked the largest percentage decline in the bottom-up EPS estimate during a quarter since Q1 2016 (-9.8%).

At the sector level, all 11 sectors recorded a decline in their bottom-up EPS estimate during the quarter, led by the Energy (-34.0%), Materials (-16.3%), and Information Technology (-8.3%) sectors. The Energy sector witnessed the largest decline in its bottom-up EPS estimate for a quarter since Q1 2016 (-108.6%). The Materials sector saw the largest decline in its bottom-up EPS estimate for a quarter since Q4 2016 (-17.1%). The Information Technology sector recorded the largest decline in its bottom-up EPS estimate for a quarter since Q4 2012 (-10.0%). Overall, ten sectors recorded a larger decrease in their bottom-up EPS estimate relative to their 5-year average, while nine sectors recorded a larger decrease in their bottom-up EPS estimate relative to their 10-year average and 15-year average.

As the bottom-up EPS estimate for the index declined during the quarter, the value of the S&P 500 increased during this same period. From December 31 through March 28, the value of the index increased by 12.3% (to 2815.44 from 2506.85). Assuming the price of the index does not fall below 2506.85 today, the first quarter will mark the 15th time in the past 20 quarters.