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

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.

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).

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.