Are Analysts Cutting EPS Estimates More Than Average for S&P 500 Companies for Q3

Given concerns in the market about a possible economic slowdown, have analysts lowered EPS estimates more than normal for S&P 500 companies for the third quarter?

During the months of July and August, analysts lowered EPS estimates for the third quarter within the range of recent averages. The Q3 bottom-up EPS estimate (which is an aggregation of the median EPS estimates for Q3 for all the companies in the index) decreased by 2.8% (to $61.44 from $63.20) from June 30 to August 31.

In a typical quarter, analysts usually reduce earnings estimates during the first two months of a quarter. 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 2.7%. 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 2.6%. During the past fifteen years, (60 quarters), the average decline in the bottom-up EPS estimate during the first two months of a quarter has been 2.3%. During the past 20 years (80 quarters), the average decline in the bottom-up EPS estimate during the first two months of a quarter has been 3.0%.

Thus, the decline in the Q3 bottom-up EPS estimate during this period was between the low end and the high end of the four most recent averages (-2.3% to -3.0%).

At the sector level, ten of the eleven sectors witnessed a decrease in their bottom-up EPS estimate for Q3 2024 from June 30 to August 31, led by the Energy (-11.8%) sector. On the other hand, no sector recorded an increase in its bottom-up EPS estimate for Q3 2024 during this period.

However, it is interesting to note that while analysts decreased EPS estimates in aggregate for Q3 2024 during the past two months, they increased EPS estimates for CY 2025 by 0.3% (to $279.52 from $278.79) over this same period.

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