John Butters, Vice-President and Senior Earnings Analyst at FactSet, reported on April 6, 2023, that 106 S&P 500 companies have issued EPS guidance for the first quarter, a number that surpasses the 5-year average of 97 and the 10-year average of 98. According to Butters, out of these 106 companies, 78 have issued negative EPS guidance, while 28 have issued positive EPS guidance. This represents a significant increase in the number of companies issuing negative EPS guidance, which is above the 5-year average of 57 and the 10-year average of 65. Conversely, the number of companies issuing positive EPS guidance is below the 5-year average of 39 and the 10-year average of 33.
Butters highlighted that Q1 2023 has witnessed the highest number of S&P 500 companies issuing negative EPS guidance for a quarter since Q3 2019 (81). If the current number of 78 companies remains unchanged, it will rank as the fourth-highest number of S&P 500 companies issuing negative EPS guidance for a quarter since FactSet began tracking this metric in 2006. On the other hand, the first quarter has also seen the lowest number of S&P 500 companies issuing positive EPS guidance for a quarter since Q2 2020 (24).
At the sector level, Butters noted that the Information Technology and Industrials sectors have the highest number of companies issuing negative EPS guidance for the first quarter, with 27 and 16 companies, respectively. Combined, these two sectors account for more than half (43) of all the companies in the S&P 500 issuing negative EPS guidance for the first quarter (78).
Butters explained that if 27 remains the final number for the Information Technology sector, it will tie the records set in Q3 2022, Q2 2022, and Q3 2019 for the highest number of companies issuing negative EPS guidance in this sector since FactSet began tracking this metric in 2006. Within this sector, the Semiconductors & Semiconductor Equipment industry has the highest number of companies issuing negative EPS guidance, totaling 11.
Similarly, if the Industrials sector maintains its count of 16 companies with negative EPS guidance, Butters pointed out that it will mark the highest number of companies issuing negative EPS guidance in this sector since FactSet initiated tracking in 2006. Within the Industrials sector, the Machinery industry has the most companies issuing negative EPS guidance, numbering four.
Given the concerns about bank liquidity, Butters mentioned that one might expect to see more companies in the Financials sector issuing EPS guidance for the first quarter. However, this sector has historically seen few companies providing quarterly EPS guidance. Over the past five years, only one company on average has issued quarterly EPS guidance, while the 10-year average amounts to three companies.
Butters defined the term "guidance" (or "preannouncement") as a projection or estimate for EPS (or revenue) provided by a company in advance of reporting actual results. Guidance is classified as negative if the company's estimate (or midpoint of a range of estimates) is lower than the mean EPS estimate (or revenue estimate) the day before the guidance was issued. Conversely, guidance is deemed positive if the estimate (or midpoint of a range of estimates) provided by the company is higher than the mean EPS estimate (or revenue estimate) the day before the guidance was issued.
Footnotes:
1 Adapted from source: Butters, John. "Highest Number of S&P 500 Companies Issuing Negative EPS Guidance Since Q3 2019." 6 Apr. 2023, insight.factset.com/highest-number-of-sp-500-companies-issuing-negative-eps-guidance-since-q3-2019?utm_source=Direct&utm_medium=Email&utm_campaign=feedotter-04-06-2023&utm_content=httpsinsightfactsetcomhighestnumberofsp500companiesissuingnegativeepsguidancesinceq32019.
2 Graphs: Butters, John. "Highest Number of S&P 500 Companies Issuing Negative EPS Guidance Since Q3 2019." 6 Apr. 2023, insight.factset.com/highest-number-of-sp-500-companies-issuing-negative-eps-guidance-since-q3-2019?utm_source=Direct&utm_medium=Email&utm_campaign=feedotter-04-06-2023&utm_content=httpsinsightfactsetcomhighestnumberofsp500companiesissuingnegativeepsguidancesinceq32019.
3 Photo by Cristina Gottardi on Unsplash
