Stock Market: A Mixed Third Quarter for Corporate Earnings
Two-thirds of the companies in the Stoxx Europe 600 have now reported their third-quarter 2023 earnings. On average, these results have fallen short of analysts’ expectations, according to an analysis conducted by the teams at Lazard Frères Gestion.
Earnings per share (EPS) are thus 6% below market consensus, in contrast to the positive surprises seen every quarter for the past two years.
Revenue figures are also disappointing, coming in 4% below expectations on average. Over the past year, positive surprises in corporate sales have become increasingly rare.
“In our September 2023 macroeconomic outlook, we warned of this risk of disappointment regarding quarterly earnings. The markets continued to anticipate relatively strong growth in corporate sales and earnings, which, while not unreasonable, turned out to be overly optimistic,” explains the investment management firm.
The issue at hand: a gradual deterioration in economic conditions, coupled with now-high interest rates that are weighing on overall economic momentum. These high interest rates are also beginning to erode companies’ net margins due to higher financing costs.
The reaction of the stock markets to these recent disappointments has been relatively muted. Despite high volatility in certain individual stocks, the Stoxx Europe 600 fell 3.7% in October before recovering some of those losses in early November.
