Second-Highest Increase in S&P 500 EPS Estimates for Q2 2021 Since 2002

During the month of April, analysts increased earnings estimates for companies in the S&P 500 for the second quarter. The Q2 bottom-up EPS estimate (which is an aggregation of the median EPS estimates for Q2 for all the companies in the index) increased by 4.2% (to $43.73 from $41.98) during this period. How significant is a 4.2% increase in the bottom-up EPS estimate during the first month of a quarter? How does this increase compare to recent quarters?

In a typical quarter, analysts usually reduce earnings estimates during the first month of the quarter. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 2.0%. During the past 10 years (40 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 2.1%. During the past 15 years (60 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 2.3%.

In fact, the second quarter marked the second-highest increase in the bottom-up EPS estimate during the first month of a quarter since FactSet began tracking this metric in 2002, trailing only Q1 2018 (+4.9%). It also marked the fourth straight quarter in which the bottom-up EPS estimate increased during the first month of the quarter. 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, nine sectors recorded an increase in their bottom-up EPS estimate for Q2 during the first month of the quarter, led by the Energy (+16.0%), Financials (+9.2%), Communication Services (+8.9%), and Materials (+8.9%) sectors. On the other hand, two sectors recorded a decline in their bottom-up estimate for Q2 during the first month of the quarter: Consumer Discretionary (-5.7%) and Consumer Staples (-1.7%).

As the bottom-up EPS estimate for the index increased during the first month of the quarter, the value of the S&P 500 also increased during this same period. From March 31 through April 29, the value of the index increased by 6.0% (to 4211.47 from 3972.89). With the S&P closing on April 30 at 4181.17 (up 5.2% for the month), the second quarter marks just the third 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 month of a quarter.

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