Highlights:

• The just-started US reporting season will back to norm after the positive excesses of the last 5 quarters for both qoq growth and positive surprises.
• Some results and guidance will be negatively affected by a slowing macro momentum, bottlenecks and higher input costs. That said, while guidance is trending down, it currently remains above historical average. Similarly to Q2, net positive pre-announcements are good, too.
• Since early September, analysts have already become cautious, reducing their expectations for the quarter appreciably. But still supporting confidence indicators and resilient high margins provide scope for positive earnings surprises in line with history, albeit much lower than during last year (5% vs 15-20%). The first 35 US firms reported already confirm such trend.
• Indeed, unit-labour costs remain well contained and cyclical sectors (including financials) are benefitting from a positive operating leverage during recovery, triggered by higher capacity utilization.
• Still, we think that toppish macro momentum and increasing input costs can cause negative revisions beyond the Q3 reporting season which we expect to be overall good.
• Thus, we remain below consensus by 4.5% and 6.5% in 2022 and 2023 (average US and EMU), respectively, having some scope to absorb future negative earnings revisions without impacting our fair value target.
• The cautious estimate for the latter points to a total return of 5-6% in the 12 months ahead (average US and EMU). The risks mentioned above keep such targets potentially more volatile than in the past, that is why we have recently lowered further our OW position in equities.

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