October 28, 2019

Q3 earnings’ results look decent vs reduced expectations. 2020 forecasts remain optimistic but dovish Central Banks and early signs of an economic trough help. Remain positive on equities.

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In Short

The Q3 reporting season has advanced to cover about 40% in the US and Europe. At the index level in the US, both the earnings and sales’ yearly growth dropped (to -0.5% and +3.7%) compared to the previous quarter: Energy and Materials suffered. Sharply reduced analysts’ expectations have been beaten for both earnings and sales.
Q3 earnings’ results look decent vs reduced expectations. 2020 forecasts remain optimistic but dovish Central Banks and early signs of an economic trough help. Remain positive on equities.
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Highlights:

  • The Q3 reporting season has advanced to cover about 40% in the US and Europe. At the index level in the US, both the earnings and sales’ yearly growth dropped (to -0.5% and +3.7%) compared to the previous quarter: Energy and Materials suffered. Sharply reduced analysts’ expectations have been beaten for both earnings and sales.
  • Ex-Energy & Materials, US yearly growth is in positive territory: at 4.9% and 6.3% for earnings and sales, respectively.
  • While the earnings growth in Europe (-2.4%) has likewise decreased, the EA’s one has experienced a turnaround (from -6.9% to 2.5%) – largely due to unusually positive results in Health Care and Utilities. The sales growth has somewhat increased (to 2.4% and 3.9%, for Europe and the EA respectively).
  • For these reasons, while we see a relatively good continuation of the Q3 reporting seasons, we still expect 2020 estimates to be reduced further.
  • That said, global dovish monetary policies and early signs of a stabilization in the most cyclical sectors of the economy should continue to support equities.

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Q3 EARNINGS’ RESULTS LOOK DECENT VS REDUCED EXPECTATIONS. 2020 FORECASTS REMAIN OPTIMISTIC BUT DOVISH CENTRAL BANKS AND
EARLY SIGNS OF AN
ECONOMIC TROUGH HELP.
REMAIN POSITIVE ON
EQUITIES.

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