It is early in the earnings season but the stock market is seeing the lowest number of EPS beats in five years, according to Societe Generale.
Sixty S&P 500 (SP500) (NYSEARCA:SPY) companies have reported on Q4 with “the net number of EPS Beats at lowest level since 2017,” SocGen said. “The number is also lackluster for Top-line with lowest net beats since 2019.” (See charts below.)
“Margin pressure evident with net profit margins falling for six straight quarters, Q4’22 at 11.4% vs peak at 13% in Q1’21,” the team added. “Weak EPS Revisions Ratio (ERR, a breadth measure of EPS outlook): During the current season, S&P 500 EPS revision dropped further to 0.67, i.e. 67 stocks saw EPS upgrades for every 100 stocks seeing downgrades.”
“Defensives (XLP) (XLU) (XLV) are faring better on ERR. Consensus 2023 EPS growth has dropped from 10% to 3% over the past few months.”
Societe Generale said its model suggests negative EPS growth for the first three quarter of 2023 and predicts the S&P will trade between 3,500 and 4,200.
“We are in ‘soft-landing’ camp yet at 4200, US stocks will price in max soft landing backdrop.”
See top-moving stocks on earnings.