4th largest increase in EPS estimates for S&P 500 companies since 2009 for Q3 – Check details

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The increase in the bottom-up EPS estimate during the first two months of a quarter is significant.

One of the primary factors leading the stock prices to move up over the long term is the corporate earnings. During the first two months of the third quarter, analysts increased earnings estimates for companies in the S&P 500 for the quarter. The Q3 bottom-up EPS estimate increased by 3.8% (to $49.31 from $47.50) during this period.

According to John Butters, Vice President and Senior Earnings Analyst at FactSet, this 3.8% increase in the bottom-up EPS estimate during the first two months of a quarter is significant. “In fact, the third quarter marked the fourth-largest increase in the bottom-up EPS estimate during the first two months of a quarter since 2009. It also marked the fifth straight quarter in which the bottom-up EPS estimate increased during the first two months of the quarter.”

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And, this is reflected in the index movement as well. In the research report Butters says, “The third quarter marked the seventh time in the past 20 quarters (five years) in which both the bottom-up EPS estimate for the index and the value of the index increased during the first two months of a quarter.”

The graph below shows how the index showed growth as the EPS estimate also increased.

Source: FactSet

S&P 500 has gained more than 20 per cent and 30 per cent over the YTD and 1-year period, respectively.

Currently, three major factors are weighing on the front of global stocks – Impact of coronavirus Delta variant, pace of economic recovery and the Federal Reserve tapering programme. Any dip in the stock prices of quality companies that stand to benefit in the post-Covid world could be accumulated for the long term.

For an investor looking to add US stocks so as to diversify across global economies, S&P 500 provides a long term opportunity for building wealth. S&P 500 is considered to be the top-most single indicator of large-cap US stocks and it includes nearly 500 leading corporates across about 11 sectors. Some of the top stocks are Microsoft, Apple, Berkshire Hathaway, Facebook, Visa and Amazon amongst others.

If you wish to get hold of all of them in a single investment, consider investing in SPDR S&P 500 ETF also known as SPY which is an exchange traded fund (ETF) that tracks the S&P 500 index. Individual stocks or SPY ETF, buying is easy and simple in them after opening an international brokerage account.

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