Largest Increase in S&P 500 EPS Estimates for Q2 2021 to Date Since 2002

During the first two months of the second quarter, analysts increased earnings estimates for companies in the S&P 500 for the quarter. The Q2 bottom-up EPS estimate (which is an aggregation of the median EPS estimates for Q2 for all companies in the index) increased by 5.8% (to $44.42 from $41.97) from March 31 through May 31. How significant is a 5.8% 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 2.8%. 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 3.1%. 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 3.7%.

In fact, the second quarter marked the largest increase in the bottom-up EPS estimate during the first two months of a quarter since FactSet began tracking this metric in 2002. The previous record was 5.7%, which occurred in Q1 2018. However, it should be noted that analysts made substantial cuts to EPS estimates for Q2 2021 during the first half of 2020 (December 31 to June 30). During this time, the Q2 bottom-up EPS estimate declined by 19.2% (to $38.85 from $48.11). Since June 30, analysts have been steadily increasing EPS estimates for companies for Q2 2021.

At the sector level, eight sectors recorded an increase in their bottom-up EPS estimate for Q2 during the first two months of the quarter, led by the Energy (+26.3%), Materials (+12.4%), Financials (+8.9%), Communication Services (+8.6%), and Information Technology (+7.8%) sectors.

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 March 31 through May 31, the value of the index also increased by 5.8% (to 4204.11 from 3972.89). The second quarter marked just the sixth 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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