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Q2 Sees Second Largest Increase in S&P 500 EPS Estimate Since 2011

Companies and Earnings

By John Butters  |  June 1, 2018

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 all the companies in the index) rose by 0.2% (to $39.07 from $38.98) during this period. How significant is a 0.2% increase in the bottom-up EPS estimate during the first two months of a quarter? How does this decrease compare to recent quarters?

On average, the bottom-up EPS estimate usually decreases during the first two months of a quarter. During the past five years (20 quarters), the bottom-up EPS estimate has recorded an average decline of 2.7% during the first two months of a quarter. During the past 10 years (40 quarters), the bottom-up EPS estimate has recorded an average decline of 3.7% during the first two months of a quarter. During the past 15 years (60 quarters), the bottom-up EPS estimate has recorded an average decline of 2.9% during the first two months of a quarter.

Change in SP500 Quarterly EPS First 2 months of QTR

In fact, the second quarter of 2018 marked the second largest increase in the bottom-up EPS estimate over the first two months of a quarter since Q2 2011 (+1.5%). The current record is 5.7%, which occurred during the first two months (January and February) of the previous quarter (Q1 2018).

SP500 Change in Q218 EPS vs Change in Price

Sector-Level Breakdown

At the sector level, five sectors recorded an increase in their bottom-up EPS estimates during the first two months of the quarter, led by the Energy sector (+10.1%). Five sectors recorded a decrease in their bottom-up EPS estimates during the first two months of the quarter, led by the Consumer Staples sector (-4.2%). Eight sectors recorded a smaller decrease (or an increase) in their bottom-up EPS estimates relative to their five-year average decline and 10-year average decline over the first two months of a quarter. Seven sectors recorded a smaller decrease (or an increase) in their bottom-up EPS estimates relative to their 15-year average decline for the first two months of a quarter.

As the bottom-up EPS estimate for the second quarter rose 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 increased by 2.4% (to 2705.27 from 2640.87). The second quarter marked the second time since Q2 2011 in which both the bottom-up EPS estimate for the quarter and the value of the index increased during the first two months of the quarter.

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John Butters

Senior Earnings Analyst

John’s weekly research report, Earnings Insight provides analysis and commentary on trends in corporate earnings data for the S&P 500, including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, Financial Times, The New York Times, MarketWatch, and Yahoo! Finance.

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