Larger U.S. companies are seeing smoother sailing ahead in the near future. A September 30th FactSet Insight article highlights that S&P 500 firms seem to be becoming more sanguine about the economy and their future, as the number of S&P 500 firms issuing negative guidance fell for the third straight quarter.
S&P 500 firms negative guidance continues to fall
According to recent FactSet data, fewer S&P 500 firms have issued negative EPS preannouncements for the third quarter in a row. For the third quarter of 2014, 83 companies have put forth negative EPS guidance to date, which is below the record high of 95 forms set in Q4 2013, but less than the 86 firms that issued negative EPS guidance in the second quarter of 2014. If 83 ends up as the number for the third quarter, it will mark the fewest companies issuing negative EPS guidance since the fourth quarter of 2012 when 79 S&P 500 firms did so.
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Also of note, although a greater number of firms have produced positive EPS preannouncements relative to the fourth quarter of 2013, fewer companies have released positive EPS guidance relative to last quarter. To date, 26 companies have put out positive EPS guidance. This is greater than the record low of 17 back in the fourth quarter of 2013, but less than the 30 firms that published positive EPS guidance in the second quarter of 2014. If the number of firms issuing positive EPS guidance for the quarter remains at 26, it will be the second highest number since the fourth quarter of 2012 (34).
FactSet also examined negative and positive EPS guidance at the sector level, The data showed that three sectors have been behind most of the decrease in negative EPS guidance for the S&P 500 firms since the fourth quarter of 2013: Materials, Information Technology and Industrials. The Materials sector saw the greatest decrease in the number of companies issuing negative EPS guidance since Q4 2013 at -5, then the Industrials at -4 and Information Technology at -4. Furthermore, the Information Technology and Materials sectors at +6 and +4 respectively have also seen the biggest increases in the number of companies with positive EPS guidance since fourth quarter 2013.
On the other hand, the Consumer Discretionary, Consumer Staple, and Utilities sectors all saw the number of firms with negative EPS guidance relative to Q4 2013 move up slightly (+1). Also of note, the Consumer Discretionary (-2) and Consumer Staples (-1) sectors have also seen declines in the number of companies with positive guidance since the fourth quarter of 2013.