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Downward estimate revisions for first 2 months of Q4 in-line with 5-year average

Nov 30, 2012

Of the 490 companies that have reported earnings to date for the third quarter, 70% have reported earnings above estimates. This percentage is roughly equal to the average of 70% recorded over the past four quarters. However, only 40% of companies have reported sales above estimates. This percentage is well below the average of 55% recorded over the past four quarters. If 40% is the final percentage, it will mark the lowest percentage of companies reporting sales above estimates for a quarter since Q1 2009 (36%).

The blended earnings growth rate for Q3 2012 was unchanged this week relative to last week at -0.9%. Since the end of the quarter (September 30), eight of the ten sectors have recorded an increase in earnings growth, led by the Energy, Health Care, and Financials sectors.

If the final earnings growth rate is -0.9%, it will mark the end of the streak of consecutive quarters of earnings growth for the index at eleven. Four of the ten sectors are reporting a decline in earnings growth for the quarter, led by the Materials (-23.6%) and Energy (-17.7%) sectors. Although eight of the ten sectors are reporting revenue growth for the quarter, the blended sales growth rate for the index is -1.2%. The Energy (-17.1%) and Materials (-6.4%) sectors are the only two sectors reporting sales decreases. Slower economic growth in Europe and emerging markets countries (China) and less favorable foreign-exchange rates had a negative impact on both top-line and bottom-line growth for many multi-national companies in the index in the third quarter.

Change in Bottom-Up EPS Estimate in First 2 Months of Quarter: 5-YearCompanies and analysts have lowered expectations for Q4 2012. In terms of preannouncements, 78 companies have issued negative EPS guidance for Q4 2012, while 29 companies has issued positive EPS guidance. Analysts have lowered their EPS estimates for companies for Q4 2012, as the estimated earnings growth rate for Q4 2012 has dropped to 3.8% from 9.3% since the end of the third quarter. On a per-share basis, the earnings estimate for Q4 2012 has declined 5.0% over the first two months of the quarter, which is in-line with the 5-year average for this time frame (-5.2%).

During the upcoming week, four S&P 500 companies are scheduled to report earnings for Q3 2012 and one company is scheduled to report earnings for Q4 2012.

Read more about the earnings trends of the S&P 500 in this week's edition of FactSet Earnings Insight. Visit to launch the latest report. 

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