Uddrag fra Zerohedge:
To underscore just how much concern there is heading into earnings season, Flood notes that he got this nugget which sums up earnings sentiment nicely: “Sell-side analysts are scrambling to get ahead of Q2 earnings; over the last 5 days they’ve downgraded more than 500 names (on a net basis). Since the Financial Crisis, there’s only been 4 other weeks when that many names have been downgraded that quickly.”
For a slightly more balanced take we go to the first Q2 Earnings Tracker from BofA’s Savita Subramanian, in which she previews the starting earnings season as follows: “expect a ‘meet’ at best and a weak guide.” Below are the key highlights:
Miss more likely than beat
All of the macro barometers we track that tend to lead earnings results are pointing to a miss – a falling guidance ratio…
…ailing corporate sentiment…
…. slowing signs in both consumption and industrial activity plus negative economic surprises.
But channel checks in Industrials and Software are healthy, and early reporters have beat EPS by a median of 3% – typically early reporters don’t fare as well ahead of a disappointing quarter. Expectations for 2Q have come down 1% versus the average cut of 4% in the last three months, but excluding Energy the cut has been a deeper 5%.
We expect in-line EPS in 2Q ($55.35/+5% YoY). Weakening guidance will remain the focus: 2H-2023 consensus EPS will come down substantially; 2023 earnings are at least $20 too high.
Tech: from secular growth & defense to cyclical risk
Investors who view Tech as defensive, citing stable earnings during the past two recessions, may be disappointed in the next one. Consensus earnings for the Nasdaq 100 have lagged S&P 500 earnings for nine months running. Since the ‘80s, Tech has seen more frequent sales declines than the S&P 500…
… but has been buoyed by cost benefits from globalization and (more recently) a pull forward in demand. But mega-cap Tech companies could now face the biggest challenges amid de-globalization.
Capex: should be slowing (pro-cyclical) but now a must-do
S&P 500 capex surged in 1Q earnings: +20% YoY. Capex has been pro-cyclical, and leading indicators are starting to roll over (e.g., our capex guidance ratio, Business Roundtable CEO Survey).
But capex may be more necessary than in prior cycles: supply chain challenges revealed by the pandemic, emerging geopolitical risks and ambitious greenhouse gas (GHG) emission reduction pledges have conspired to push mentions of near-shoring capex to record highs.
Tight labor incentivizes companies to spend to automate; and capital stock is old – we haven’t had a refurbishment capex cycle for decades. At a point when earnings are slowing, mandatory capex could represent an unwelcome draw on free cash: buy capex takers, not spenders.
