Largest Drop in S&P 500 EPS Estimate Over First Two Months of a Quarter since Q1 2009
by John Butters, Senior Earnings Analyst [1]
During the first two months of Q1 2016, analysts lowered earnings estimates for companies in the S&P 500 (SPX) (SPY) for the quarter. The Q1 bottom-up EPS estimate (which is an aggregation of the estimates for all the companies in the index) dropped by 8.4% (to $26.69 from $29.13) during this period. How significant is an 8.4% decline in the bottom-up EPS estimate during the first two months of 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 the first two months of a quarter has been 3.8%. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during the first two months of a quarter has been 2.8%. During the past ten years, (40 quarters), the average decline in the bottom-up EPS estimate during the first two months of a quarter has been 3.6%. Thus, the decline in the bottom-up EPS estimate recorded during the first two months of the first quarter was larger than the 1-year, 5-year, and 10-year averages.
[2]
In fact, this was the largest percentage decline in the bottom-up EPS estimate over the first two months of a quarter since Q1 2009 (-24.0%).
As the bottom-up EPS estimate declined during the first two months of the quarter, the value of the S&P 500 also decreased during this same time frame. From December 31, 2015 through February 29, the value of the index decreased by 5.5% (to 1932.23 from 2043.94). This marked only the fifth time in the past 20 quarters in which both the bottom-up EPS estimate and the value of the index decreased during the first two months of the quarter.
[3]
At the sector level, the Energy sector (XLE) by far has recorded the largest percentage decline in the bottom-up EPS to date at 93.3% (to $0.20 from $2.97). If this is the final percentage decline for the quarter, it will mark the largest percentage decrease in the bottom-up EPS estimate for the Energy sector for an entire quarter since FactSet began tracking the data in 2002. As of now, the largest percentage decrease in the bottom-up EPS estimate for the Energy sector for an entire quarter is -50.2% (to $4.17 from $8.38), which occurred in Q1 2015.
Read more about earnings trends, visit www.factset.com/earningsinsight [4]to launch the latest full report.