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How Far Have S&P 500 Earnings Estimates Fallen for Q4?

By John Butters, Senior Earnings Analyst
Dec 4, 2015

During the first two months of the fourth quarter, analysts lowered earnings estimates for companies in the S&P 500 for the quarter. The Q4 bottom-up EPS estimate (which is an aggregation of the estimates for all the companies in the index) dropped by 3.4% (to $29.61 from $30.65) during this period. How significant is a 3.4% 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 4.2%. 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 2.7%. 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 3.6%. Thus, the decline in the bottom-up EPS estimate recorded during the course of the first two months of the fourth quarter was lower than the one-year average and the 10-year average, but above the five-year average.

While the bottom-up EPS estimate declined over the first two months of the fourth quarter, the value of the S&P 500 increased during this same time frame. From September 30 through November 30, the value of the index increased by 8.4% (to 2080.41 from 1920.03). This marked the 14th time out of the past 20 quarters in which the bottom-up EPS estimate decreased while the value of the index increased during the first two months of a quarter.

At the sector level, eight of the 10 sectors recorded a decline in the bottom-up EPS estimate for the first two months of the fourth quarter, led by the Materials (-18.8%) and Energy (-10.6%) sectors. Despite recording the largest decreases in the sector-level bottom-up EPS estimates for Q4, these two sectors witnessed double-digit increases in value over this same time frame. The price of the Materials sector increased by 14.1% during this period, while the price of the Energy sector increased by 10.4%.

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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