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Analysts Cut S&P 500 EPS Estimates for Q3 Within Average Ranges(Oct 4, 2019)
created At: 2/20/2025
Sell
Sell
This analysis includes a sell recommendation. Please carefully review all mentioned risk before proceeding.
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Fact
In Q3, the S&P 500 bottom-up EPS estimate fell by 3.6% (to $41.35 from $42.90). The decline is larger than the 5-year (-3.3%) and 10-year (-3.1%) averages but smaller than the 15-year average (-4.3%). All 11 sectors saw EPS estimate declines, led by Energy (-17.5%) and Materials (-12.4%). 7 sectors saw larger-than-5-year average declines, 8 sectors exceeded 10-year averages, and 5 sectors topped 15-year averages. Despite falling EPS estimates, the S&P 500 rose 1.2% in Q3 (to 2976.74), marking the 15th time in 20 quarters where EPS estimates fell while the index increased.
Opinion
The 3.6% decline in EPS estimates, though modest relative to long-term averages, highlights persistent earnings pressures, particularly in cyclical sectors like Energy and Materials. The market’s continued rise, despite downgraded earnings, reflects investor confidence in broader macro trends, potential monetary policy support, or sector rotation. The recurring divergence between earnings expectations and index performance suggests that market sentiment and liquidity often outweigh short-term earnings revisions.
Core Sell Point
While Q3 saw a typical decline in EPS estimates, the S&P 500’s rise underscores investor resilience, suggesting market optimism continues to outweigh earnings concerns, despite sector-specific pressures.

During 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 median EPS estimates for the third quarter of all the companies in the index) dropped by 3.6% (to $41.35 from $42.90) during this period. How significant is a 3.6% decline in the bottom-up EPS estimate during a quarter? How does this decrease compare to recent quarters?

During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 3.3%. During the past 10 years (40 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 3.1%. During the past fifteen years (60 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 4.3%. Thus, the decline in the bottom-up EPS estimate recorded during the third quarter was larger than the five-year average and the 10-year average, but smaller than the 15-year average.

At the sector level, all 11 sectors recorded a decline in their bottom-up EPS estimate during the quarter, led by the Energy (-17.5%) and Materials (-12.4%) sectors. Overall, seven sectors recorded a larger decrease in their bottom-up EPS estimate relative to their five-year average, eight sectors recorded a larger decrease in their bottom-up EPS estimate relative to their 10-year average, and five sectors recorded a larger decrease in their bottom-up EPS estimate relative to their 15-year average.

As the bottom-up EPS estimate for the index declined during the quarter, the value of the S&P 500 increased during this same period. From June 30 through September 30, the value of the index increased by 1.2% (to 2976.74 from 2941.76). The third quarter marked the 15th time in the past 20 quarters in which the bottom-up EPS decreased while the value of the index both increased during a quarter.

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