Expectations High for Q3 Earnings Amid Slowing Demand, High Interest Rates - PandaForecast.com
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October 17, 2023

Expected Earnings During Economic Shifts

The launch of the third-quarter earnings season follows a robust beginning led by banks, prompting specialists to predict that companies are on track to exceed predictions. These forecasts are amidst an economic background of consistently high interest rates and decreasing demand. The Investing Group Leader, Fear & Greed Trader, remarks, “The overall outlook going into this earnings season is filled with caution and expectations appear to be reasonable.”

Broad Market Projections

LSEG’s Refinitiv suggests a 1.3% year-over-year (Y/Y) increase in Q3 earnings for S&P 500 (SP500) organizations. Despite the minimal growth, this would signify the first upturn after three quarters of stagnant or declining profits. “The forecasted growth rate for 2023 is just around 2.3%, marking its lowest since 2020,” observes analyst Tajinder Dhillon, adding that the third quarter is predicted to make a humble contribution but expectations are set high for a significant fourth quarter growth rate standing at about 10.8%. In contrast, Bloomberg Intelligence analysts expect a slight decline of 0.8% in S&P 500 companies’ Q3 earnings Y/Y, which they believe will be followed by a recovery of about 6.2% in the fourth quarter.

Sector-wise Performance

Dhillon from Refinitiv expects an ongoing positive Y/Y earnings surge within the Industrials and Consumer Staples domains. Conversely, he foresee downward shift in Q3 earnings within the Materials, Healthcare, and Real Estate sectors. The Energy sector also seems vulnerable with likely reduced earnings due to stringent Y/Y contrasts. Analyst David Trainer highlights that an approximate 71% of S&P 500 companies have recorded Street Earnings that outbalance Core Earnings, whereas Street Earnings are beneath Core earnings for about 27% of these organizations.

Pivotal Stocks to Watch

Earnings reports expected this week will bring notable businesses such as Tesla (TSLA), AT&T (T), Netflix (NFLX), Kinder Morgan (KMI), and Philip Morris (PM) under scrutiny. Both Johnson & Johnson (JNJ) and Bank of America (BAC) already reported Q3 results that outperformed estimates. Goldman Sachs (GS) along with United Airlines (UAL) are also due to reveal their earnings figures today.



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