2017 company earnings in graphs
Each week during the earnings season, Charles Stanley Earnings Tracker looks at reported earnings from major markets across the globe and compares them with analysts’ expectations. It covers the S&P, FTSE 100,FTSE 350 and the Topix and also contains forward-looking earnings forecasts.
As central banks prepare to reduce stimulus measures, solid corporate earnings growth is needed to keep markets buoyant. Corporate earnings growth is therefore more important this year than any other since the financial crisis.
This earnings season we have seen solid corporate earnings results in all the major markets although this has been overshadowed at times by the volatility in the stock market caused by investors’ focus on the impact rising bond yields will have on equities.
Notably, stocks that miss estimates underperform the market greater than stocks that beat estimates outperform the market. However, the positive outlook for 2018 earnings for all major markets remains intact as we see upward revisions being made to 2018 estimates and this underpins support for equities on expectation that they deliver.
As we start to see central banks of major economies start to withdraw monetary stimulus, traditional macro drivers of performance will become more important hence why we are seeing a more positive outlook for Cyclicals over Defensives as these types of sectors should benefit from improving global activity.
This week’s key findings include:
• With more than 80 per cent of FTSE 100 stocks having reported, the UK earnings season is now coming to a close. Earnings results show 2017 was a good year for FTSE 100 stocks as all sectors saw positive earnings growth although Cyclicals, led by Energy, did better than Defensive sectors.
• Looking ahead, consensus expectations are for the FTSE 100 to see earnings growth of 8 per cent in 2018 with Energy, Tech and Telecoms considered to have the biggest growth potential.
• Materials, Healthcare and in particular Utilities are expected to see their earnings decline.
• In the US, the earnings season has ended with 99 per cent of S&P stocks reporting full-year results. US companies left 2017 on a strong footing reporting earnings growth of 22 per cent and revenue growth of 10 per cent. They also lead other markets in terms of earnings beats with 74 per cent of stocks beating earnings estimates and 73 per cent beating sales estimates.
• The market expects 2017’s strong performance to continue in 2018 with full-year earnings expected to rise 24 per cent led by the recovering Energy sector, Technology, Consumer Discretionary and Financials. Furthermore, positive momentum remains intact as estimates for 2018 earnings are being revised up by 7 per cent in the last three months for US stocks.
• Technology is expected to be a driver of US growth this year. Excluding the FAANGs (Facebook, Apple, Amazon, Netflix, and Alphabet’s Google). US earnings expectations fall to 18 per cent growth, compared with 22 per cent including these stocks.
• Notably, 79 per cent S&P500 stocks beat fourth quarter earnings estimates and fourth-quarter earnings are up 27 per cent driven by Cyclicals.
• 62 per cent of Eurozone stocks have reported full-year results and have delivered earnings growth of 28 per cent and sales growth of 7 per cent. However, the region lags the US and UK in that fewer companies are beating earnings and sales consensus estimates.
• At present Eurozone stocks are expected to see broad-based earnings growth in 2018 with earnings at the index level expected to rise 11 per cent. However, Financials is expected to see the biggest increase in 2018 earnings of 18 per cent as the prospect of interest rate rises in the Eurozone now on the horizon provides a more favourable background for the sector.
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