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Q4 reporting season update

The Q4 result season is well underway and companies are delivering positive surprises across geographies.

Date published
1 Mar 2022
Zehrid Osmani Head of Global Long-Term Unconstrained

We're zooming in on the reporting season for Q4. It has been a very strong reporting season in Q4, so far across geographies. We'll start with the U.S, 88% of companies reported in the U.S, 69% of companies beat on sales and 76% beat on earnings. On the sales side the positive surprise was 3% on aggregate, whilst on earnings it was circa. 6%. So consistent positive beats on sales and earnings in the U.S. The strongest sectors in terms of beats across sales and or earnings have been energy, utilities and financials.

Turning on to Europe, the European reporting season is 68% through, with 71% of companies beating on sales and 59% on earnings. The sales surprise has been much stronger than in the U.S, 13% positive on average, 5% only on earnings however, so some more margin pressure than expected. Strongest sectors have been energy, utilities similarly to the U.S. but technology, unlike the U.S., has been the other strong sector in this reporting season.

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On Asia, 44% of companies reported in Asia so far, with a 61% positive beat on sales and 47% on earnings. The sales surprise has been +9% on average, whilst on earnings it has been a negative surprise of -6%. Strongest sectors across sales and earnings have been financials and utilities.

Looking ahead, we believe that 2022 is a year of much lower earnings gross expectations compared to a 2021 that has been a year of sharp recovery. And therefore, we want to continue to focus on companies with consistent growth, superior structural growth and that have the ability to surprise positively in this phase of the economic cycle, that we explained in previous videos, where earnings momentum will be an important focus.

We also want to focus on companies with strong pricing power, given the uncertain inflationary backdrop, which means that those companies will be more able to withstand those pressures and be able to protect their margins. Finally, companies in that area of quality growth, which have had an important pullback, are companies where we see the strongest fundamental and the more consistent growth profiles, and therefore we believe there are some very attractive opportunities that have shaped up after this recent sell-off, as there has been top-down style leadership shift away from quality growth towards value.

We want to focus on companies that have strong pricing power in this high inflation background.

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