Before the third quarter earnings season began in late September, the market was holding its breath somewhat as it waited to see what numbers companies had made over the past three months, coinciding with the start of the economic slowdown that had provoked. analysts and investors are considering an acceleration of rate cuts that would save the economy and avoid falling into the feared recession.
But once again, either companies showed unexpected strength in a more difficult environment, or experts once again erred on the side of conservatism in their forecasts. In fact, the start of this season has given rise to doubts. In Europe, Stoxx 600 companies published profits 0.3% above of the consensus estimate while in the American S&P 500, they did so in 1.4%. Regarding the services, the surplus was 3 and 7%respectively.
Thanks to this better than expected data, they managed to reduce the drop in earnings per share (EPS) to 1% on the Old Continent and bring it to 6.7% on Wall Street. With these numbers, it allows analysts to continue to improve earnings estimates for the full year, relieve pressure on stock market valuations after increases which, for the whole year, already exceed 25% in the North American index and 5% in the European benchmark.
“With more than half of the companies having presented results in Europe, we can say that there were positive surprises which left far behind the forecasts of a decline of 5% which existed before starting”, we explain. from Bank of America. “This surprise responds, in part, to the deterioration of estimates that existed before the start of the season and, in part, to the fact that they actually did better than expected before these aforementioned reductions,” they add.
Thus, it is expected that the Stoxx 600 will close this presentation of results with an EPS of 9.2 euros per sharethe second largest in the historic series, only behind 2022. A record that the S&P 500 will set with $61.05 by title. “More than half of the companies exceeded estimates, which contrasts with the weak performance presented by the macro continental”, they continue in Bank of America, where they designate the cyclical sectors as the weakest segment, with the exception of the financial sectors, while the defensive sectors performed better than expected, contrary to what s ‘has happened so far. “The banking sector was the sector with the biggest positive surprises, 19% more than the previous year, or 11 points more than expected; industrial companies also presented good results,” concludes the North American bank.
For the year as a whole, the analyst consensus Bloomberg European and American companies are expected to achieve record earnings per share. The estimate indicates an annual EPS of 35.4 euros and 236 dollarsrespectively in what is a record that will only last one year since in 2025 experts predict increases of 7 and 14%.
At BlackRock, they believe that “the strength of US corporate earnings will continue to extend beyond the technology sector during earnings season” and they also see “positive signals in the Japanese and European markets.” “Many technology companies have reported solid earnings growth, but we are also seeing surprisingly robust growth, relative to their historical data, in other sectors, some of which include companies with a regular dividend policy.” , they contribute in Capital Group.
