April 15, 2019

Q1 earnings seasons to show weakness, yet markets are to be supported by a stabilizing macro momentum and dovish central banks

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In Short

The Q1 reporting season should reflect current macro weakness and uncertainty linked to Brexit and trade.
Q1 earnings seasons to show weakness, yet markets are to be supported by a stabilizing macro momentum and dovish central banks
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Highlights:

  • The Q1 reporting season should reflect current macro weakness and uncertainty linked to Brexit and trade.
  • Q1 yearly earnings growth estimate in the US has already decreased massively during the last year: from +10.6% in April 2018, or +5.3% in January 2019, to current -2.5%.
  • Indeed, the first 29 results in the US show a -2.6% yearly earnings growth compared to 17.6% in Q4. But the sales growth looks healthier at +3.7% (7.5% in Q4).
  • Earnings surprises are positive at 4% vs -0.9% in Q4 and the median sector shows an even higher +4.8% vs 3.3% in Q4. Sales surprises are positive, too, at 0.7% (-0.2 in Q4).
  • Overall we cannot expect too positive results and guidance, and estimates for 2019 and 2020 can continue to be slightly adjusted downward but the point is that results should paint a picture that investors have already acknowledged.
  • Of course, major negatives will not be, as always, taken well, also because the market is up 15% year-to-date, so we cannot exclude some risks in the short term.
  • But more relevant will be the current stabilization in the macro and monetary condition indicators and, most of all, the reaffirmed dovish stance by central banks which in turn supports investor as well as firms and households’ confidence.

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Q1 EARNINGS SEASONS TO SHOW WEAKNESS, YET MARKETS ARE TO BE SUPPORTED BY A STABILIZING MACRO MOMENTUM AND DOVISH CENTRAL BANKS

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