Earnings Season Monitor - Initial results show Sales beat but EPS miss
We publish the initial readings on the 4Q results so far. Weighted EPS has come in 0.6% ahead of consensus so far, but more companies have missed than beaten for the first time since 4Q14. Sales results have been much stronger however, while price reaction has been negatively skewed.
* Europe has so far seen more earnings misses than beats for the first time since 4Q14.
Weighted earnings have come in fractionally ahead of expectations, but so far we have seen 8% more companies miss consensus than beat. This would be the first quarter in three years where Europe has seen more misses than beats, and to date the worst quarter on this basis since 2008. We would note however that it is still early days in the European results season, and only Financials and Industrials have seen 10 or more companies report EPS in MSCI Europe.
* Sales have been much better than earnings.
In general top-line results have been much better than EPS - a complete reversal of the trend seen in 3Q results. 13%
more companies have beaten sales estimates than missed, weighted sales have beaten by 3.6% and the median stock 0.2% ahead of expectations.
* The median stock is seeing EPS growth of 8%.
Weighted earnings growth in Europe currently stands at 38% YoY in 4Q, but this is heavily distorted by base effects in Financials. More representative is the growth in the median stock, where earnings are up 7.8% year-on-year. Sales are in aggregate growing by 3.7%, while the median stock is seeing top-line growth of 3.0%.
* Price reaction has been negatively skewed.
So far there has been a clear negative skew in performance around results. On the day of results, stocks beating EPS estimates have outperformed by 1%, while misses have underperformed by 2%. The negative skew in performance around results is even more pronounced on sales.
* Earnings revisions neutral.
Earnings revisions in Europe are currently flat, but there is a wide range at the sector level. Commodities are currently seeing a very strong pace of earnings upgrades while Financials and Cyclicals have also seen modest upgrades. Defensives have been the laggard and have seen a renewed acceleration in earnings downgrades.