The US earnings season is off to a poor start, according to Wells Fargo & Co. Just roughly one week into the third-quarter reporting period, the earnings per share of the companies that have reported so far have been 0.3% below the consensus analyst forecast, analysts led by Ohsung Kwon, the bank’s chief equity strategist, wrote in a note to clients. That’s significantly below what investors have come to expect: The profits typically exceed forecasts by an average of 4% during the period, according to data going back to 2012. Moreover, just 48% came in ahead of expectations, compared with the usual 61%.
The analysts said there’s no signs of “fundamental cracks” yet, with companies “still largely upbeat” about demand. But they noted that the early figures represents “one of the weakest starts to EPS season in history.” Consistently strong corporate profits have helped support stock prices over the past several years. But the patchy results have so far failed to provide much of a boost, with a mixed showing by big Wall Street banks cementing the longest weekly losing streak for their stocks since the 2008 financial crisis. Bank of America Corp. strategists Savita Subramanian and Victoria Roloff viewed the results as “solid overall but not inspiring.”
About 40% of banks in the S&P 500 beat on both earnings and revenue in the first week this time around. It was 100% for the same group last quarter. Banks continued to sound upbeat on credit and the consumer, but concerns over peak capital markets activity persisted. Banks were not the only ones to disappoint. Delta Air Lines Inc. reported lower-than-expected third quarter earnings and reduced its full-year profit forecast amid elevated jet fuel prices. The muted market reactions have also been noteworthy as the outlook is clouded by the Iran war’s energy shock, rising interest rates and the US congressional elections early next month.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing