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Smaller Cuts than Average to S&P 500 Earnings Estimates for Q2 2015

By John Butters, Senior Earnings Analyst
Jul 2, 2015

During the second quarter, analysts lowered earnings estimates for companies in the S&P 500 for the quarter. The Q2 bottom-up EPS estimate (which is an aggregation of the estimates for all the companies in the index) dropped by 2.3% (to $28.72 from $29.39) during this period. How significant is a 2.3% 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 5.0%. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 3.4%. During the past 10 years, (40 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 5.0%. Thus, the decline in the bottom-up EPS estimate recorded during the second quarter was lower than the 1-year, 5-year, and 10-year averages. 

Why was the decline in the bottom-up EPS estimate for the quarter lower than average? At the sector level, the Energy sector reported the largest increase in the bottom-up EPS estimate for Q2 2015 of all 10 sectors during the quarter. This marks a sharp contrast to last quarter, when the Energy sector recorded the largest decrease in the bottom-up EPS estimate of all 10 sectors.

The bottom-up EPS estimate for Q2 2015 for the Energy sector increased by 9.4% (to $4.50 from $4.11) during the second quarter. Over this same time frame, the price of crude oil increased by 20.5% (to $59.47 from $47.60). 

Despite the increase in estimated earnings during the quarter, the Energy sector is still predicted to report the largest year-over-year decline in earnings (-60.0%) of all 10 sectors.

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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