In current years, the first and third quarter earnings seasons are typically the least important of the year. In fact, since May, firms that are listed on any European Union market will no longer be required to announce their quarterly results and will only have to do so each semester. However, at least in Spain, the vast majority continue to do so voluntarily.
On this occasion, the time to present results that will begin informally this Tuesday, with Alcoa first and the North American banks later, does have special relevance for the analysis of experts and investors since it will be the first quarter that compares with a quarter where the most severe confinement had already ended in much of the planet, so the variations in profits will reflect in a more realistic way the recovery process of companies on both sides of the Atlantic.
In this context, the earnings forecasts of the consensus of analysts that FactSet collects point to an increase in EPS (earnings per share) compared to the same period of 2020 of almost 55% for the Stoxx 600 and 50% for the S&P 500 . This rise, if confirmed, would imply that both indices would be able to recover levels of 2019, prior to the coronavirus.
A very good season of results was already seen after the second quarter of the year, “when the earnings revisions reached a multi-year maximum”, point out from Julius Baer, who warns that “now the revisions could tend to fall in the coming months So we recommend ditching cyclical and value stocks and opting for defensive and growth stocks, which tend to perform better in this phase of the cycle. ” “The basis for comparison will no longer be so easy, although the confirmation that the cycle continues to improve should maintain the good background tone,” they point out from Renta 4.
From A&G Private Banking, they also warn that “there have already been some cuts in estimates in insurance, capital goods and transport, while durable consumer goods have been revised upwards.” “Regarding margins, they are expected to be historically high, but we believe that they will not be maintained since the differential between GDP growth and wages will narrow in the coming quarters, as many are already warning. companies in their own presentations, “they add.
When the financial year began, it was not in the analysts’ pools that Europe was able to recover all the profit lost due to the pandemic. Yes it was that the other side of the Atlantic was achieved. However, continued improvement in earnings estimates on both sides of the Atlantic will leave a full recovery on the Old Continent and a record annual profit on Wall Street .
In numbers, on the other side of the pond, $ 203 per share is expected, 46% more than in 2020 and 24% more than in 2019. This profit will continue to grow next year, in this case, by more than 9% , up to $ 222 per share. On this side, there was a 34% drop in EPS between 2019 and 2020, leaving the figure below 17 euros, the lowest in the last decade. From there, a 66% recovery is forecast, to 28 euros, which improves the 2019 figure by almost 9%, completely leaving behind the hole caused by the coronavirus pandemic. Likewise, for next year, growth normalizes and falls to 6.6% year- on- year, if the expectations of the FactSet analyst consensus are met.
“It will be the highest annual growth in the history of the Stoxx 600 while for 2022 we have lowered the expectation, maintaining a total rebound in earnings per share during this cycle of 45%, which is in line with what happened after the financial crisis of 2008 “, explain from Bank of America.
From Generali Investments they believe that “the time has come to take off the crutches, that is why the markets have shown during the month of September that certain sensation of reeling”. “Even after such correction, the global MSCI is up more than 14% so far this year and we see the recent movement more as a correction than as the start of a new trend,” they add. “However, the political risk is increasing and the autumn promises to be more volatile,” they conclude.
Banks and consumer discretionary
According to consensus data, compiled by Bank of America, consumer discretionary, financials and commodities companies are the ones that will make the largest contributions to Stoxx 600 earnings per share growth while next year will be consumer. discretionary, health and industrial firms which will. On the contrary, according to these data, basic resources will be the only sector whose profit will be reduced for next year, after having reached a peak in 2021.