April 04, 2023
Expectations for 1Q23 corporate reports
The corporate reporting season is about to begin. In this context, the consensus considers that the companies of the S&P 500 would have recorded a contraction of 5% per year in their profits in 1Q23 (excluding the energy sector, the contraction of profit would be 6.6% YoY). This would represent the most significant drop in reported earnings since 2Q20 and would mark the second straight quarter that earnings have contracted.
Only 4 sectors of the 11 that compose the index showed a positive performance. In this sense, the consumer discretionary sector registered the highest growth rate in the quarter (+36.4% annual) due to the strong performance of the sub-industries of retail, hotels, resorts, and cruise lines. Next, the industrial, energy, and financial sectors show increases of +17.9% per year, +13.7% per year, and +5.2% per year, respectively. On the other hand, the materials sector would have registered the weakest performance, with a 33.5% annual drop in profits, given the weakness of activities related to basic chemicals and copper mining.
About sales, the consensus expects growth of 1.6% per year (the lowest value since 3Q20) for the companies in the index. The financial sector experienced the highest growth rate in the quarter (+9.1% annually) due to the positive performance of consumer finance, financial services, and banking activities. Once again, the materials sector appears to be the weakest, with a drop in sales of 8.3% annually.
JP Morgan will give the starting signal on April 14, along with the reports of other central US banks, so that the market will be attentive to their respective announcements amid recent events related to the banking system.