Sustained Momentum In 4Q CY09 Earnings
The earnings reporting season that has just ended showed that the bulk of the corporate results that we covered (84.5%) came in either within or above our expectations. The recovery in earnings that started from 2Q 2009 was sustained into the 4Q, with earnings upgrades continued to exceed downgrades. The upgrade to downgrade ratio remained strong at 1.8, similar to the situation in the previous quarter, although the magnitudes of upgrade in earnings are smaller now.
More companies are reporting better margins from improving demand, better product mix and lower operating expenses on the back of the implementation of cost-cutting measures. Of the 103 companies that we covered, more than half of it, i.e. 55 of the results (53.4% of the total) were within our expectations. In addition, 32 companies (31.1% of the total) reported earnings that exceeded our projections and only 16 results that we covered (15.5% of the total) came in below forecasts (see Table 1). A fairly similar picture was reflected in the consensus numbers, where 75.7% of the reported earnings were either in line or above expectations (46.6% within consensus numbers and 29.1% above projections) and 24.3% of the results disappointed (see Table 2). This suggests that there is still room for earnings upside surprises in the quarters ahead as the economic recovery gains momentum, even though it may not be as significant relative to what we have seen during the previous three quarters.
Strategy / Earnings Review : Market Volatility Amidst Market Volatility Amidst Policies - 02/03/2010
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