With the end of the third quarter today, it marks a good point in time to measure downward EPS estimate revisions for the S&P 500 for the third quarter.
In aggregate, dollar-level earnings for the index are about 3% below expectations at the start of the quarter. How significant is a 3% decline in expected earnings? How does that percentage compare to the previous quarter? How does it compare to the median over the past few years?
The 3% decline is not as high as the 5% decline recorded in Q2 2011. Prior to last quarter, the 3% decline reflects the largest decline seen since Q2 2009 (-5%). However, it is nowhere near as high as the 30% to 35% declines witnessed during the peak quarters (Q4 2008 and Q1 2009) of the earnings recession. The median change in aggregate earnings over the last 5 years (20 quarters) is -3%.
Overall, analysts are expecting another solid quarter of earnings and revenue growth for the S&P 500. The index is currently predicted to see earnings growth of 13.1% (on earnings of $235B), and revenue growth of 10.0% (on sales of $2,446B). Both of these growth rates are below projections at the beginning of the quarter of 16.5% and 10.5%. Nine of the ten sectors have seen a drop in expected earnings growth since June 30. Downward revisions to estimates in the Financials sector account for about half of the decline in estimated earnings growth for the index.
If the final earnings growth rate is 13.1%, it will mark the eighth consecutive quarter of double-digit earnings growth for the index. Nine of the ten sectors are projected to see growth in earnings and all ten sectors are projected to see growth in sales. Sectors to watch this quarter in terms of high year-over-year growth in earnings and sales include Energy, Materials, and Consumer Discretionary.
This week, five S&P 500 companies are expected to announce earnings for the third quarter. Read more about earnings for Q3 2011 in this week's edition of FactSet Earnings Insight.
All of the data used to compile FactSet Earnings Insight is available in the FactSet workstation.
|
