Second Largest Increase in S&P 500 EPS Estimate Since 2010 for Q2'18

During the second quarter, analysts have 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) has increased by 0.8% (to $39.35 from $39.03) during this period. How significant is a 0.8% increase in the bottom-up EPS estimate during a quarter? How does this increase compare to recent quarters?

On average, the bottom-up EPS estimate usually decreases during a quarter. During the past five years (20 quarters), the bottom-up EPS estimate has recorded an average decline of 3.4% during a quarter. During the past 10 years (40 quarters), the bottom-up EPS estimate has recorded an average decline of 5.0% during a quarter. During the past 15 years (60 quarters), the bottom-up EPS estimate has recorded an average decline of 3.9% during a quarter.

In fact, the second quarter of 2018 will mark the second largest increase in the bottom-up EPS estimate during a quarter since Q2 2010 (+3.0%). The current record (since 2002) is 5.4%, which occurred in the previous quarter (Q1 2018).

Sector-Level Breakdown

At the sector level, five sectors have recorded an increase in their bottom-up EPS estimate during the quarter, led by the Energy sector (+15.5%). Six sectors have recorded a decrease in their bottom-up EPS estimate during the quarter, led by the Consumer Staples sector (-4.4%). However, nine sectors have recorded a smaller decrease (or an increase) in their bottom-up EPS estimate relative to their five-year average and their 10-year average for a quarter. Seven sectors recorded a smaller decrease (or an increase) in their bottom-up EPS estimate relative to their 15-year average for a quarter.

As the bottom-up EPS estimate for the second quarter rose during the quarter, the value of the S&P 500 also increased during this same period. From March 31 through June 28, the value of the index increased by 2.9% (to 2716.31 from 2640.87). Assuming the price of the index does not fall below 2640.87 today, the second quarter will mark the second time since Q4 2010 in which both the bottom-up EPS estimate for the quarter and the value of the index increased during the quarter.