Second-Highest Increase in S&P 500 EPS Estimates Since 2002 for Q1

During the first two months of the first quarter, analysts increased 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 for Q1 for all the companies in the index) has increased by 5.0% (to $39.50 from $37.61) during this period. How significant is a 5.0% increase in the bottom up EPS estimate during the first two months of a quarter? How does this increase compare to recent quarters?

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 3.5%. 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 3.2%. 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 3.8%. Thus, while analysts typically lower EPS estimates during the first two months of a quarter, they increased EPS estimates during the first two months of Q1 2021.

In fact, the first quarter marked the second-highest increase in the bottom-up EPS estimate during the first two months of a quarter since FactSet began tracking this metric in Q2 2002, trailing only the 5.7% increase during the first two months of Q1 2018. However, it should be noted that analysts made substantial cuts to EPS estimates for Q1 2021 during the first half of 2020 (December 31 to June 30). During this time, the Q1 bottom-up EPS estimate declined by 16.5% (to $37.40 from $44.78).

At the sector level, seven sectors recorded an increase in their bottom-up EPS estimate for Q1 during the first two months of the quarter, led by the Energy (+86%) and Financials (+11%) sectors. Four sectors recorded a decline in their bottom-up EPS estimate for Q1 during the first two months of the quarter, led by the Industrials (-14%) sector.

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 December 31 through February 25, the value of the index increased by 2.0% (to 3829.34 from 3756.07). The first quarter marked the fifth 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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