S&P 500 Negative EPS Guidance Is Above Average but Not at Peak Levels

Given concerns in the market about a possible recession, are more S&P 500 companies than normal issuing negative EPS guidance for the second quarter and for the full year?

Number of Companies Issuing Negative EPS Guidance Is Up for Q2

The answer is yes. More S&P 500 companies are issuing negative EPS guidance for the second quarter and for the full year compared to recent averages. However, the numbers are not at record-high or peak levels.

In terms of quarterly EPS guidance, 103 S&P 500 companies have issued quarterly EPS guidance for the second quarter. Of these companies, 71 have issued negative EPS guidance and 32 have issued positive EPS guidance. The number of companies issuing negative EPS guidance is above the five-year average of 59 and above the 10-year average of 66. In fact, the second quarter has the highest number of S&P 500 companies issuing negative EPS guidance for a quarter since Q4 2019 (73).

However, it should also be noted that the number of S&P 500 companies issuing negative EPS guidance for the second quarter is below the peak number of the last 10 years of 87 (Q1 2016). In fact, the number for the second quarter does not currently rank in the top 10 for the highest number of S&P 500 companies issuing negative EPS guidance for a quarter in the past 10 years.

At the sector level, the Information Technology (27), Consumer Discretionary (10), and Industrials (10) sectors have the highest number of companies issuing negative EPS guidance for the second quarter. On the other hand, the Information Technology sector also has the highest number of companies issuing positive EPS guidance (18) for the second quarter.

More Companies Issuing Negative Guidance for CY 2022

In terms of annual EPS guidance, 238 S&P 500 companies have issued annual EPS guidance for CY 2022 through June 30. Of these companies, 132 have issued negative EPS guidance and 106 have issued positive EPS guidance. The number of companies issuing negative EPS guidance is above the five-year average of 105 and above the 10-year average of 117 for this point in time of the calendar year (June 30). The current year has also witnessed the highest number of S&P 500 companies issuing negative annual EPS guidance through June 30 since CY 2019 (138).

Again, it should be noted that the number of S&P 500 companies issuing negative EPS guidance for the full year is below the peak number of the last 10 years on June 30 of 142 (CY 2014). In fact, the number of S&P 500 companies issuing negative EPS guidance for CY 2022 currently ranks as the fifth-highest number in the past 10 years at the mid-point of the year.

At the sector level, the Health Care (27), Industrials (22), and Utilities (22) sectors have the highest number of companies issuing negative EPS guidance for CY 2022. On the other hand, the Information Technology (22), Health Care (21), and Industrials (18) sectors have the highest numbers of companies issuing positive EPS guidance for the year.

The market will certainly be watching for quarterly and updated annual EPS guidance issued by S&P 500 companies during the second-quarter earnings season over the next few weeks for the potential impact of revised guidance on earnings estimates for the rest of this year and for next year.

The term “guidance” (or “preannouncement”) is defined as a projection or estimate for EPS (or revenue) provided by a company in advance of the company reporting actual results. Guidance is classified as negative if the estimate (or midpoint of a range estimates) provided by a company is lower than the mean EPS estimate (or revenue estimate) the day before the guidance was issued. Guidance is classified as positive if the estimate (or mid-point of a range of estimates) provided by the company is higher than the mean EPS estimate (or revenue estimate) the day before the guidance was issued.

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