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- Companies are lowering their earnings outlooks for 2023 in an early sign of trouble ahead, says Bank of America.
- The downward revisions have weighed on S&P 500 earnings forecasts, which have dropped 10% from their June peak.
- The “early signs are troubling,” the bank said, adding it expects earnings to decelerate further this year.
Companies are releasing profit outlooks for 2023 that’s more gloomy than expected as fourth-quarter earnings season gets under way, according to Bank of America.
S&P 500 earnings forecasts have slipped by 1% after dropping 10% from where they stood last summer. “Earnings revision trends have generally been deteriorating across the board,” Savita Subramanian, head of US equity and quantitative strategy at the bank, said in a note.
The bank noted that just 11 companies have issued forward-looking profit outlooks of which seven were below consesus, while two were above. These “early signs are troubling,” Subramanian noted, adding she expects earnings to decelerate further.
″Forward looking reads are less positive,” she said, showing signs that “corporate misery” is rising. “The recession may be delayed, but weakness in data indicates rising pressures, especially in goods, which represent 50% of S&P 500 earnings,” Subramanian added.
According to Bank of America, 52 companies in the S&P 500 have reported fourth-quarter earnings results. The numbers have missed analysts’ estimates by 1% this time round, whereas usually they’d beat targets by half a percentage point.
This is after analysts downgraded estimates by 7% coming into the reporting season.
About 25% of companies in the S&P 500 are yet to to report fourth-quarter results this week. Of the 57 companies that have already reported results so far, 67% beat profit estimates by a median of 5%, while 67% beat revenue estimates by a median of 2%, according to data from Fundstrat.
Analysts however are worried about Big Tech earnings. Credit Suisse has said tech earnings are likely to be so dismal that they could drag on the outlook for the wider S&P 500 over the next few quarters.