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Earnings Final Cut: Earnings Growth Moderates
Key Debate: The slowdown in earnings remains a matter of
concern for market participants – what did the latest earnings
quarter produce in terms of performance and earnings
revisions?
As highlighted in our earnings thus far Our key takeaways :
update, earnings for this quarter were marked by about 50% of our
coverage companies reporting an earnings growth in excess of
20% YoY even as 1/4 of the companies reported a decline in
earnings YoY.
As expected, this is the first time in seven quarters that broad
markets have lagged the narrow market (MS coverage) - at
26% YoY and 29% YoY, respectively. Ex-energy, earnings
growth was at 14% for both. Earnings growth was slowest in 5-
quarters.
Sensex companies reported 26% growth in aggregate earnings
– ahead of expectations by 7ppt. Excluding, ONGC and Tata
Motors, Sensex earnings are up 10.5% YoY.
In aggregate, 54% of reported MS covered companies beat
analyst expectations. The beat is lower than the average of the
past 6 quarters but higher than the average from the previous
cycle (Jun-06 to Dec-07).
The quality of earnings was quite strong with net financial
income’s share in pre-tax earnings at 1.2% significantly lower
than 5-year average of about 5%.
Interest costs were 1.9% of sales, higher than the 5-year
average of 1.4%. Depreciation costs fell marginally after
touching a 10-year high at the end of previous quarter.
This quarter’s earnings were led by Industrials and Energy while
ggest laggards with substantial Telecoms and Utilities were the bi
drop in YoY earnings.
How were earnings relative to the consensus expectations?
Earnings at the aggregate level appeared to be marginally ahead
of expectations. Profit growth at the aggregate level (ex-energy)
for our coverage universe was 3% points head of our analysts
estimates. At the sector level, following are the observations.
Five out of ten sectors seem to have reported earnings ahead •
of expectations with Energy leading the charge while
Healthcare lagging.
Six out of the ten sectors saw more earnings beats than •
misses.
Financials produced the biggest positive surprises, while •
Consumer staples and Healthcare produced the most negative
surprises.
F11 earnings growth revisions were negative for 6 out of 10 •
sectors over the past month with Materials and Healthcare
seeing the highest negative earnings revisions while Financials
seeing the most positive earnings growth revisions.
: The recent events in the country coupled with higher Our View
inflation and global factors is putting pressure on growth and
creating the risk of downward earnings revisions. For now, we
think that the downward earnings revisions are likely to remain
moderate. Our proprietary earnings growth leading indicator
continues to point to slower broad market earnings growth in the
coming quarters.
.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Earnings Final Cut: Earnings Growth Moderates
Key Debate: The slowdown in earnings remains a matter of
concern for market participants – what did the latest earnings
quarter produce in terms of performance and earnings
revisions?
As highlighted in our earnings thus far Our key takeaways :
update, earnings for this quarter were marked by about 50% of our
coverage companies reporting an earnings growth in excess of
20% YoY even as 1/4 of the companies reported a decline in
earnings YoY.
As expected, this is the first time in seven quarters that broad
markets have lagged the narrow market (MS coverage) - at
26% YoY and 29% YoY, respectively. Ex-energy, earnings
growth was at 14% for both. Earnings growth was slowest in 5-
quarters.
Sensex companies reported 26% growth in aggregate earnings
– ahead of expectations by 7ppt. Excluding, ONGC and Tata
Motors, Sensex earnings are up 10.5% YoY.
In aggregate, 54% of reported MS covered companies beat
analyst expectations. The beat is lower than the average of the
past 6 quarters but higher than the average from the previous
cycle (Jun-06 to Dec-07).
The quality of earnings was quite strong with net financial
income’s share in pre-tax earnings at 1.2% significantly lower
than 5-year average of about 5%.
Interest costs were 1.9% of sales, higher than the 5-year
average of 1.4%. Depreciation costs fell marginally after
touching a 10-year high at the end of previous quarter.
This quarter’s earnings were led by Industrials and Energy while
ggest laggards with substantial Telecoms and Utilities were the bi
drop in YoY earnings.
How were earnings relative to the consensus expectations?
Earnings at the aggregate level appeared to be marginally ahead
of expectations. Profit growth at the aggregate level (ex-energy)
for our coverage universe was 3% points head of our analysts
estimates. At the sector level, following are the observations.
Five out of ten sectors seem to have reported earnings ahead •
of expectations with Energy leading the charge while
Healthcare lagging.
Six out of the ten sectors saw more earnings beats than •
misses.
Financials produced the biggest positive surprises, while •
Consumer staples and Healthcare produced the most negative
surprises.
F11 earnings growth revisions were negative for 6 out of 10 •
sectors over the past month with Materials and Healthcare
seeing the highest negative earnings revisions while Financials
seeing the most positive earnings growth revisions.
: The recent events in the country coupled with higher Our View
inflation and global factors is putting pressure on growth and
creating the risk of downward earnings revisions. For now, we
think that the downward earnings revisions are likely to remain
moderate. Our proprietary earnings growth leading indicator
continues to point to slower broad market earnings growth in the
coming quarters.
.
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