Q2 earnings face a “not-so-low hurdle” however ought to handle to clear it, albeit with challenges, Barclays strategists stated in a Wednesday be aware.
Consensus estimates for Q2 earnings per share (EPS) progress stand at 1% for Europe and 10% for the US, reflecting an total constructive outlook regardless of the softening macroeconomic information.
“Q2 EPS estimates have held up effectively regardless of unfavorable progress surprises,” the be aware states.
The sturdy Q1 outcomes and constructive steering helped equities attain new highs, however latest financial information has been much less favorable, pushing earnings revisions again into unfavorable territory. The slowdown in financial exercise over Q2 signifies that firm steering for the second half and financial 12 months 2024 will probably be extra essential than the precise Q2 numbers.
In Europe, margins are anticipated to contract, particularly amongst cyclicals, whereas within the US, margins are anticipated to broaden, pushed by the tech sector.
“As Europe FY24 EPS progress is again finish loaded into H2, aided by simple comps vs. H2’23, steering will seemingly be extra vital than the Q2 numbers for inventory response,” strategists wrote.
Barclays stated the second half of the 12 months presents a mixture of potential progress and dangers. Constructive earnings revisions in H1 have been pushed by better-than-expected macro information and stable Q1 earnings, however latest financial softening might problem H2 earnings expectations.
“In truth, now we have seen EPS revisions turning unfavorable once more in most areas most just lately, growing the significance of firm steering,” they continued.
“Nonetheless, with the rate-cutting cycle getting beneath approach in H2, and burgeoning expectations of a reflationary political scene within the US beneath a possible Trump administration, we imagine buyers might look by blended Q2 earnings, and play the gentle touchdown narrative.”
Nonetheless, that is seemingly to assist the US greater than Europe, strategists highlighted. In the meantime, the UK continues seeing upgrades to financial information, prompting Barclays to stay Chubby on that market.
