Mixed results in regard of corporate earnings provide little impetus for markets

As of the end of last week, 99% of all companies listed in the S&P 500 have reported their results for the fourth quarter of 2022, and the outcome was mixed. 67.7% of companies were able to exceed analysts' expectations, while 26.2% were well below them in some cases. The rest of the companies reported within the expected range. In Europe, the trend is more positive. All in all, however, the reported numbers did not excite investors.

By far the biggest disappointments were observed in the communication services sector. This sector not only includes telecom companies, but also companies in the media and entertainment industry since a change in September 2018. The best-known representatives are Alphabet (Google's parent company), Meta Platforms Inc. (formerly Facebook Inc.), the Match Group (dating platforms), Disney, and Netflix. While the Walt Disney Company exceeded consensus estimates by about a third, Netflix missed earnings per share by more than 70%.

The highest positive earnings surprises were in the non-basic consumer goods sector (consumer durables, clothing, and online retail).In the important IT sector (76 companies out of the 500 in the S&P index), more than 80% of companies were able to exceed expectations, but the average earnings surprise was just only over 0%.The strongest earnings growth was recorded by energy stocks (led by suppliers such as Haliburton or Schlumberger Ltd), followed by industrial companies and companies in the non-base consumption sector (Amazon, Chipotle Mexican Grill, Tesla, or Yum Brands).In sum, the average profit growth of S&P 500 companies was -2.6%. In contrast, revenue growth was significantly positive at +5.6%.

Almost three-quarters of European companies in the STOXX Europe Index have reported their Q4 2022 figures. Both earnings growth (+7.8%) and revenue growth (+9.6%) are positive. Unsurprisingly, the major oil and gas multinationals top the list of positive earnings. European banks also posted good numbers. Profit declines and negative surprises were mainly reported by chemical and raw material companies.

Market participants are now increasingly focusing on macroeconomic data, especially the still-tense labour market in the United States. The US Labour Department will release the corresponding numbers next Friday. In addition to price level stability, a high level of employment is the most important goal of Federal Reserve (Fed) monetary policy. Inflation expectations are still the main driver of the markets.

This information represents the market opinion of Kathrein and does not contain any direct or indirect recommendation to buy or sell securities or investment strategies. When investing in securities, fluctuations in prices due to market changes are possible at any time. Representations of past performance do not allow for reliable conclusions to be drawn about future results.