Before the start of the third quarter results season, at the end of September, the market was somewhat holding its breath waiting to see the numbers that companies had achieved in the last three months, coinciding with the beginning of the economic slowdown. which had led analysts and investors to discount an acceleration of rate cuts that would save the economy and avoid falling into the feared recession.
But, once again, either companies have shown unexpected strength in a more difficult environment or experts have once again erred on the side of excessive conservatism with their forecasts. In fact, the start of this season brought doubts. In Europe, Stoxx 600 firms have posted earnings a 0.3% above of the consensus estimate while in the US S&P 500 they have done so in 1.4%. As far as benefits are concerned, the surplus has been 3 and 7%respectively.
Thanks to these better-than-expected data, they have managed to reduce the fall in earnings per share (EPS) to 1% in the Old Continent and increase it to 6.7% on Wall Street. With these numbers, it allows analysts to continue improving profit estimates for the year as a whole, easing some pressure on equity valuations after increases that for the year as a whole already exceed 25% in the North American index and 5% in the European reference.
“With more than half of the companies having presented results in Europe, we can say that there have been positive surprises that leave far behind the forecast of the 5% drop that existed before starting,” they explain from Bank of America. “This surprise responds, in part, to the deterioration in the estimates that existed before the season began and, in part, to the fact that they have actually done better than was predicted before these aforementioned cuts,” they add.
Thus, the forecast is that the Stoxx 600 will end this results presentation with an EPS of 9.2 euros per sharethe second largest in the historical series, only behind 2022. A record that the S&P 500 will set with $61.05 by title. “More than half of the companies have beaten estimates, which contrasts with the weak performance presented by the macro continental”, they continue in Bank of America, where they point to the cyclical ones as the weakest segment except the financial ones while the defensive ones have performed better than expected, contrary to what has been happening until now. “Banking has been the sector with the greatest positive surprises, being 19% above the previous year, 11 points more than expected; industrial companies have also presented good results,” the North American bank concludes.
Looking at the year as a whole, the consensus of analysts Bloomberg It is expected that both European and American companies will achieve an all-time high in earnings per share. The estimate points to 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 expand beyond the technology sector in the earnings season” and they also see “positive signals in the Japanese and European markets.” “Many technology companies have reported solid profit growth but we also see surprisingly robust growth, relative to their historical data, in other sectors, some of which include companies with a policy of regular dividend distribution,” they contribute in Capital Group.
#Business #results #withstand #economic #slowdown #drive #rise #stock #markets
