After 9% of the US results are out, both median yearly growth and surprises vs consensus look decent. Historically, this bodes well for the rest of the season.
US Q4 2019 earnings season starts decently well.
Highlights:
- After 9% of the US results are out, both median yearly growth and surprises vs consensus look decent. Historically, this bodes well for the rest of the season.
- Earnings growth consensus for Q4 2019 has been declining to become slightly negative: from 11.5% one year ago to -0.5% yoy. Consensus for sales (+4.3% yoy) remained broadly stable.
- A weaker trade-weighted US dollar, higher oil prices, bottoming capacity utilization and recovering margin proxy (CPI/unit labor costs) all signal earnings to have a mid-single digit growth this year.
- This would also be facilitated through base effects as earnings growth in 2019 was flat.
- In the euro area (EA), increased credit impulse, better IFO momentum, slowing labor costs increase and better macro surprises are also pointing to a bottoming earnings momentum, provided that exogenous risks stay at bay, as we expect.
- We maintain OW on equities, albeit with a reduced exposure after the recent rally.
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