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Largest Cuts to S&P 500 Estimates since 2009 due to Energy Sector

By John Butters, Senior Earnings Analyst
Apr 2, 2015

During the first quarter of 2015, analysts lowered earnings estimates for companies in the S&P 500 for the quarter. The Q1 bottom-up EPS estimate (which is an aggregation of the EPS estimates for all the companies in the index) dropped by 8.2% (to $27.05 from $29.48) during the quarter. How significant is an 8.2% decline in the bottom-up EPS estimate during a quarter? How does this decrease compare to recent quarters?

During the past year (four quarters), the average decline in the bottom-up EPS estimate during a quarter has been 4.3%. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 3.0%. During the past 10 years, (40 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 4.8%. Thus, the decline in the bottom-up EPS estimate recorded during the first quarter was higher than the one-year, five-year, and 10-year averages.

In fact, this marks the largest percentage decrease in the bottom-up EPS estimate for the S&P 500 for a quarter since Q1 2009 (-26.8%).

The Energy sector alone accounts for nearly half (46%) of the decline in expected earnings for Q1 from December 31 through March 31. The Q1 bottom-up EPS estimate for this sector fell by 50.3% (to $4.16 from $8.38) during the first quarter, which was the largest percentage decline for all 10 sectors.

In fact, this quarter marks the largest percentage decrease in the bottom-up EPS estimate for the Energy sector to date for an entire quarter since FactSet began tracking the data in 2002. Prior to Q1 2015, the largest percentage decrease in the bottom-up EPS estimate for the Energy sector during a quarter was -42.0% (to $5.37 from $9.36) in Q2 2009. 

Read more about earnings trends in this edition of FactSet Earnings Insight. Visit www.factset.com/earningsinsight to launch the latest report.

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