Today in the podcast, thoughts on 1Q23 reporting season which got underway last week. Two big things you need to know. First, 1Q23 reporting season has gotten off to a decent start. We review what jumps out to us on the stats so far. Second, the tone in company commentary on earnings calls has been balanced so far. We run through key themes in our reading from last week.
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Now, the details.
Starting with Takeaway #1: 1Q Reporting Season Is Off To A Decent Start In Terms Of The Stats
% of Russell:
The percent of companies beating consensus on EPS is up in both indices, despite the fact that the pace of revenue beats has continued to slip.
Russell:
Beats and misses are performing pretty much in line with historical trend among the Russell 2000 names that have reported.
Russell:
Within the S&P 500, Consumer Discretionary and Staples have joined Industrials in slightly positive revisions territory for both EPS and sales while Tech has slipped a little.
Within the Russell:
Moving on to Takeaway #2: There’s Been A Balanced Tone To Company Commentary So Far
As has become our custom, our team has been reading through the earnings call transcripts of the companies that have reported. Overall, the tone was fairly balanced, with acknowledgement of resiliency and bright spots along with acknowledgement of problems that have emerged and worries on the C suite’s mind. It still feels a little early to identify key themes given how early we are in reporting season and the heavy representation of Financials, but here’s what we’re hearing so far and a few things that jumped out to us the most in our reading:
Consumers have been described as normalizing, healthy, stable, and careful. One company noted weaker demand for pools among lower-end consumers while one credit card company noted that restaurant and travel spend remained strong. Outside of consumers, the commentary has seemed pretty balanced between companies talking about rebounds, recovery, and improving demand in their discussion of recent trends, and those noting compounding pressures, pullback on discretionary projects, and caution caused by headlines.
Outlook discussions have emphasized conservatism and 2nd-half views. We found it comforting that one home builder expressed greater comfort with providing guidance. On the topic of recession specifically, most companies that addressed it acknowledged rising risks of a downturn but weren’t baking one in explicitly. Heightened uncertainty remained a key theme as was vigilance with regard to commercial real estate.
Some air time was given to the banking crisis. Impacts are still generally being described as limited, though some banks did express concern about heightened regulation and some companies noted the possibility of tightening lending standards, an issue that’s in focus among investors already.
China has still generally been referenced in favourable terms, but some companies did note that China hasn’t been recovering as fast as expected or highlighted uncertainty about the recovery.
few cuts from the Fed before:
Others noted that inflation remains elevated and pricing remains strong. However, there was less discussion on these topics than we had expected.
On the topic of labor, most companies acknowledged an improving backdrop.
There was a more cautious tone on capital deployment, particularly on buybacks from the Banks.
Several companies complained about the bad weather in 1Q and its impact.
That’s all for now. Thanks for listening. And be sure to reach out to your RBC representative with any questions.
