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S&P 500 Now Projected to Report a YoY Decline in Earnings in Q1 2020

Earnings

By John Butters  |  March 6, 2020

The earnings growth rate for the S&P 500 for the fourth quarter is 0.9%. This marks the first time the index has reported year-over-year growth in earnings since Q4 2018. Looking at the first quarter (Q1 2020), what are analyst expectations for year-over-year earnings? Do analysts believe earnings growth will continue in the first quarter of 2020 also?

The answer is no.

Over the past week, the aggregate earnings growth rate for Q1 2020 changed from slight year-over-year earnings growth on February 28 (+0.5%) to a slight year-over-year earnings decline today (-0.1%).

S&P 500 Earnings Growth Rate Q1 2020

However, expectations for earnings growth for Q1 2020 have been falling over the past few months. On September 30, the estimated earnings growth rate for Q1 2020 was 7.1%. By December 31, the estimated earnings growth rate had fallen to 4.4%. Today, the estimated earnings decline is -0.1%.

For more details on the downward revisions to EPS estimates for S&P 500 companies for the first quarter, please see my February 28 article.

Six of the 11 sectors are now projected to report a year-over-year decrease in earnings for the first quarter, led by the Materials (-16.6%), Industrials (-14.2%), and Consumer Discretionary (-10.4%) sectors.

S&P 500 Earnings Growth by Sector Q1 2020

If the index reports a year-over-year decline in earnings in the first quarter, it will mark the fourth time in the past five quarters in which the index has reported a year-over-year decline in earnings. Analysts in aggregate currently expect earnings growth to return in Q2 2020 (3.3%) and double-digit earnings growth to return in Q4 2020 (10.9%).

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John Butters

Vice President, Senior Earnings Analyst, Investor Relations

Mr. John Butters is Vice President and Senior Earnings Analyst at FactSet. His 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, The Financial Times, The New York Times, MarketWatch, and Yahoo! Finance. Mr. Butters has over 15 years of experience in the financial services industry. Prior to FactSet in January 2011, he worked for more than 10 years at Thomson Reuters (Thomson Financial), most recently as Director of U.S. Earnings Research (2007-2010).

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