Jan 11, 2021 - Economy & Business

Analysts ramp up their Q4 earnings targets

Reproduced from FactSet; Chart: Axios Visuals
Reproduced from FactSet; Chart: Axios Visuals

Equity analysts raised their earnings estimates for companies in the S&P 500 by 2.3% during the fourth quarter, to $36.93 from $36.10, as optimism continues to rise.

What it means: Q4 was the second straight quarter in which Wall Street analysts have raised their earnings expectations, a reversal of the typical trend.

The big picture: Q4 was just the fourth quarter since Q4 2010 in which EPS estimates have increased during the quarter.

By the numbers: "During the past five years, the average decline in the bottom-up EPS estimate during a quarter has been 4.5%," FactSet senior earnings analyst John Butters points out in a note to clients.

  • "During the past ten years (40 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 4.2%. During the past fifteen years (60 quarters), the average decline in the bottom-up EPS estimate during a quarter has been 5.2%."

Yes, but: "[I]t should be noted that analysts made substantial cuts to EPS estimates for Q4 during the second and third quarters (March 31 to September 30). During this period, the Q4 bottom-up EPS estimate declined by 17.4% (to 36.10 from $43.73)."

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