Which S&P 500 Sector Has Seen the Least Impact to Earnings Expectations from COVID-19?

Although many restrictions are now being lifted, the economic lockdown caused by COVID-19 has had a substantial negative impact on earnings expectations for S&P 500 companies for 2020. In terms of earnings guidance from companies, more than one-third of S&P 500 companies have withdrawn EPS guidance for 2020. In terms of estimates from analysts, the S&P 500 has seen the largest cuts to earnings estimates for 2020 (on a per-share basis) since FactSet began tracking this data in 1996. While many sectors have witnessed a significant negative impact, are there any sectors that have not seen a substantial negative impact to earnings expectations for 2020 due to the virus?

The answer is yes. The one sector in the S&P 500 that has not seen a significant negative impact to earnings guidance or earnings estimates for 2020 due to the economic lockdown caused by COVID-19 is the Utilities sector.

In terms of guidance from companies, the Utilities sector has by far the highest number of companies that confirmed previous EPS guidance for 2020 (prior to the impact of COVID-19) during their earnings calls for Q1. Of the 40 S&P 500 companies that confirmed previous EPS guidance for 2020 during this time, 21 (53%) are in the Utilities sector. Given that there are only 28 companies in the Utilities sector, this means 75% of the companies in this sector confirmed previous EPS guidance issued for 2020 prior to the impact of COVID-19.

In terms of estimate revisions (on a per-share basis), the Utilities sector has recorded the smallest decline in CY 2020 EPS of all 11 sectors over the first five months of the year. The annual bottom-up EPS estimate (which is an aggregation of the median 2020 EPS estimates for all the companies in the sector) for the sector decreased by 1.6% from December 31 to May 31. This is the smallest decrease of all 11 sectors over this time frame. By comparison, the annual bottom-up EPS estimate for the entire S&P 500 fell by 28.1% during this period. In addition, the Utilities sector is projected to have the highest year-over-year earnings growth of all 11 sectors for 2020 at 2.4%.

Despite the relatively small impact of COVID-19 on earnings expectations to date, the market has not rewarded the Utilities sector in recent months. The sector has seen a price decline of 9.7% since December 31, which is the sixth largest decrease in price of all 11 sectors over this time frame. By comparison, the S&P 500 as a whole has seen a price decrease of 7.1% during this period.