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

Written by John Butters | Mar 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%).

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.

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%).