Fra Factset
Larger Cuts to S&P 500 Earnings Estimates
Than Average for Q4 2015 To Date During the month of October, analysts lowered earnings estimates for companies in the S&P 500 for the fourth quarter.
The Q4 bottom-up EPS estimate (which is an aggregation of the earnings estimates for all the companies in the index and can be used as a proxy for the earnings for the index) dropped by 2.4% (to $30.02 from $30.75) during the month.
How significant is a 2.4% decline in the bottom-up EPS estimate during the first month of the quarter? How does this decrease compare to recent quarters? During the past year (4 quarters), the average decline in the bottom-up EPS estimate during the first month of the quarter has been 3.3%. During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during the first month of the quarter has been 1.7%.
During the past ten years, (40 quarters), the average decline in the bottom-up EPS estimate during the first month of the quarter has been 2.1%. Thus, the decline in the bottom-up EPS estimate recorded during the course of the first month (October) of the fourth quarter was lower than the 1-year average, but higher than the 5-year and 10-year averages. In terms of price, the value of the S&P 500 has increased by 8.8% (to 2089.41 from 1920.03) during the month of October.
Assuming the S&P 500 finishes the day with a value above 1920.03, this quarter will mark the 10th time in the past 16 quarters that the bottom-up EPS estimate decreased during the first month of the quarter while the price of the index increased during the first month of the quarter.
For these ten quarters (including Q4 2015), the average decrease in the bottom-up EPS estimate during the first month of the quarter was 2.4%, while the average increase in price during the first month of the quarter was 4.5%
