Record Performance vs. EPS Estimates by S&P 500 Companies in Q2

As of today, 98% of the companies in the S&P 500 have reported actual earnings numbers for the second quarter. Of these companies, 84% reported actual EPS above the mean EPS estimate, 2% reported actual EPS equal to the mean EPS estimate, and 14% reported actual EPS below the mean EPS estimate. In aggregate, companies reported earnings that were 23.1% above expectations. How do these percentages compare to recent averages?

The percentage of companies that reported EPS above estimates for Q2 2020 is above both the trailing one-year average (71%) and the trailing five-year average (72%). In fact, the second quarter marked the highest percentage of companies reporting EPS above estimates for a quarter since FactSet began tracking the data in Q3 2008. The previous record for the highest percentage for a quarter was 81%, which occurred in Q2 2018. At the sector level, the Information Technology (94%), Materials (93%), Health Care (92%), and Industrials (92%) sectors had the highest percentages of companies reporting EPS above estimates.

The EPS surprise percentage for Q2 2020 is also above both the trailing one-year average (+3.7%) and the trailing five-year average (4.7%). In fact, the second quarter marked the highest positive (aggregate) difference between actual earnings and estimated earnings reported by the index since FactSet began tracking the data in Q3 2008. The previous record for the highest EPS surprise percentage for a quarter was 14.7%, which occurred in Q1 2010. At the sector level, the Consumer Discretionary (+542.6%) and Industrials (+78.9%) are reporting the largest positive surprise percentages, led by companies such as Amazon.com ($10.30 vs. $1.48) and Raytheon Technologies ($0.40 vs. $0.13). It should be noted that the unusually high surprise percentage for the Consumer Discretionary sector is due to the sector reporting aggregate actual earnings of $9.1 billion compared to an estimated (aggregate) loss of $2.1 billion.

It is important to note that S&P 500 companies beat EPS estimates that were lowered at record-high levels coming into the second quarter earnings season. Aggregate earnings (on a per-share basis) for Q2 2020 declined by 37% during the quarter, which was the largest percentage decline in the bottom-up EPS estimate for a quarter since FactSet began tracking this data in Q1 2002. Please see our previous article on this topic.