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S&P 500 Price and EPS Estimate Are Both Down For First Time since Q4 2012

By John Butters, Senior Earnings Analyst
Sep 4, 2015

During the first two months of 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 estimates for all the companies in the index) dropped by 2.7% (to $29.25 from $30.06) during this period. How significant is a 2.7% decline in the bottom-up EPS estimate during the first two months of the 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 the first two months of the quarter has been 4.1%. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during the first two months of the quarter has been 2.5%. During the past 10 years (40 quarters), the average decline in the bottom-up EPS estimate during the first two months of the quarter has been 3.4%. Thus, the decline in the bottom-up EPS estimate recorded during the course of the first two months of the third quarter was lower than the one-year average and the 10-year average, but slightly above the five-year average.

The value of the S&P 500 also declined during the first two months of the third quarter. From June 30 through August 31, the value of the index decreased by 4.4% (to 1972.18 from 2063.11). This marked the first time since Q4 2012 that both the bottom-up EPS estimate and the value of the index fell during the first two months of a quarter. During the first two months of the previous 10 quarters (Q1'13-Q2'15), the value of the index increased while the bottom-up EPS estimate for the quarter decreased.

At the sector level, nine of the 10 sectors recorded a decline in the bottom-up EPS estimate for the first two months of the third quarter, led by the Materials (-7.9%), Industrials (-6.6%), and Energy (-6.3%) sectors. These three sectors also witnessed the largest declines in value over the first two months of the quarter. The Energy (-12.1%) and Materials (-10.5%) sectors were the only two sectors to record double-digit declines in value over the first two months of the quarter. The Industrials sector was tied with the Health Care sector for the third largest decline in value over this time frame at -5.5%.

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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