May 27, 2019

Q1 results for the US and EU have improved. Further improvement needs macro data to progress but trade and geopolitical risks are clear threats.

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In Short

The Q1 reporting season has improved visibly in the US at the yearly growth of +6% and 3.7% for earnings and sales, respectively. The surprises vs expectations are high, too: 4.6% and +0.36%.
Q1 results for the US and EU have improved. Further improvement needs macro data to progress but trade and geopolitical risks are clear threats.
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Highlights:

  • The Q1 reporting season has improved visibly in the US at the yearly growth of +6% and 3.7% for earnings and sales, respectively. The surprises vs expectations are high, too: 4.6% and +0.36%.
  • US Q1 earnings estimates’ drop has been massive during the last year, thus helping current beat.
  • EU results are positive, too, showing – for the median sector – an earnings growth of +6% and 3.4% for sales. Surprise vs analysts’ expectations is +4.4% for earnings and +1% for sales.
  • Concerning earnings for European styles, Value and Large caps beat Growth and Small capes.
  • Japanese numbers are weak, mirroring weaker exports and investments.
  • US and EMU revisions are trending better thanks to decent Q1 results and stabilizing macro surprises. But growth estimates for 2020 and 2021 remain sanguine.
  • The stabilization in the macro indicators and, most of all, the reaffirmed dovish stance by central banks supports a positive mid-term outlook for profits.
  • That said, increasing trade and political risks are affecting firms’ confidence, inducing a milder and slower rebound in both macro indicators and earnings versus current expectations: we stay moderately positive into year end on equities, but keeping a rather neutral near-term stance, with risks of further downside correction.

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Q1 RESULTS FOR THE US AND EU HAVE IMPROVED. FURTHER IMPROVEMENT NEEDS MACRO DATA TO PROGRESS BUT TRADE AND GEOPOLITICAL RISKS ARE CLEAR THREATS.

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