HSBC provided insights into the upcoming Q4 earnings season, noting that lowered consensus forecasts for Q4 earnings per share (EPS) growth have set a low bar, which could result in many companies exceeding expectations.
This scenario may lead to a temporary uplift in share prices for those meeting or surpassing the forecasts.
However, HSBC emphasized that sustained share price momentum will hinge on companies’ outlook for 2025.
The report indicated that the Q4 EPS growth forecast now stands at 3.8%, a significant reduction from the 9% projection following the Q3 reporting season. Most sectors have seen a decline in EPS estimates, with cyclicals remaining a growth driver.
On the other hand, revenue growth estimates for Q4 have seen a slight increase to +0.9% from -0.3% two months prior.
Looking ahead, HSBC noted an improvement in the 2025 EPS outlook for the UK, attributing this positive shift to the strength of the US dollar.
The research firm anticipates that company guidance will reflect this optimism, albeit cautiously due to uncertainties surrounding US tariff policies and weak consumer confidence, particularly in the UK. Nevertheless, early reports from the luxury sector suggest a promising start.
Despite the positive signs for 2025, the consensus EPS growth estimate for the Europe for the calendar year 2024 has been revised downward to just 0.2%, a stark contrast to the 5.6% expected at the beginning of the year.
The Consumer Discretionary and Energy sectors are noted as the most significant contributors to this downward trend.
HSBC concluded that the Q4 reporting season might confirm whether European and UK equity markets have indeed passed the peak of uncertainty.
