By Jennifer Thomson, Gavekal Capital
Among all developed world stocks, about 50% have enjoyed positive revisions to sales and/or earnings over the last 1-, 3-, and 6-month periods:
Dismal Sales and EPS Revisions
Taking a closer look into each region, we find considerable divergences in the breadth of positive revisions. Starting with DM Americas, we find a slightly more negative tendency in both sales and earnings revisions, with the utilities sector lagging on the sales side and still-recovering estimates for earnings in the energy sector.
Over in Europe, expectations have taken quite the dive from not-so-great-to-begin-with levels. While an average of 57% of DM EMEA reported positive revisions to sales estimates six months ago, that figure has dropped to just 14% for revisions over the last 1-month period. Earnings revisions haven't plummeted quite so severely, but they have nearly halved to just 23% from 43% (thanks in large part to financials) when we compare the most recent month to the six-month time frame. The only sector to defy the slow trend down over time is energy, where both sales and earnings estimates revisions enjoyed a slight bounce over the medium term (3-month), followed by continued weakening in the shorter term.
Compared to the other two developed world regions above (especially DM EMEA), DM Asia stands out here as the real bright spot, with an average of more than 90% of companies experiencing positive revisions to FY1 sales over the last month. Positive revisions to earnings estimates have not surged as much as those for sales, but did reach nearly 74% over the last 1 month, after remaining well above 50% over the last 3- and 6-month periods.
For a little perspective, positive revisions to FY1 sales and earnings estimates have improved to 53% and 48% (from the 35-30% range), respectively, when we look at all emerging market companies.
Looking more closely at each EM region, we find a much less obvious difference among the geographies. Interestingly, if there is any remarkable divergence here, it is that EM EMEA has experienced the most positive revisions to sales and earnings estimates over the last month - in sharp contrast to the disturbing dive among its developed market peers.