S&P 500 EPS Estimate Drops Only 2.9% for Q3 by John Butters, Senior Earnings Analyst – FactSet
During the third quarter, analysts lowered earnings estimates for companies in the S&P 500 for the quarter. The Q3 bottom-up EPS estimate (which is an aggregation of the EPS estimates for all the companies in the index) dropped by 2.9% (to $29.76 from $30.65) during the quarter. How significant is a 2.9% decline in the bottom-up EPS estimate during a quarter? How does this decrease compare to recent quarters?
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During the past year (four quarters), the average decline in the bottom-up EPS estimate during a quarter has been 4.9%. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 4.3%. During the past 10 years, (40 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 5.6%. Thus, the decline in the bottom-up EPS estimate recorded during the third quarter was smaller than the one-year, five-year, and 10-year averages.
EPS Estimates Down, S&P 500 Value Up
As the bottom-up EPS estimate declined during the quarter, the value of the S&P 500 increased during this same time frame. From June 30 through September 29, the value of the index increased by 2.5% (to 2151.13 from 2098.86). Assuming the market does not close at or below 2098.86 today, the third quarter will mark the sixteenth time in the past 20 quarters in which the bottom-up EPS estimate decreased during the quarter while the value of the index increased during the quarter.
S&P 500 EPS Estimate
At the sector level, the Energy sector witnessed the largest percentage decline in the bottom-up EPS estimate at -30.7% (to $1.49 from $2.15). Similar to the index as a whole, the value of the S&P 500 Energy sector also increased (slightly) as the bottom-up EPS estimate decreased. From June 30 through September 29, the value of the S&P 500 Energy sector increased by 0.3% (to 513.68 from 512.39).
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