Global Markets Strategy09 February 2024J P M O R G A Nwww.jpmorganmarkets.comEquity StrategyMislav Matejka, CFA AC(44-20) 7134-9741mislav.matejka@jpmorgan.comJ.P. Morgan Securities plcPrabhav Bhadani, CFA(44-20) 7742-4404prabhav.bhadani@jpmorgan.comJ.P. Morgan Securities plcNitya Saldanha, CFA(44 20) 7742 9986nitya.saldanha@jpmchase.comJ.P. Morgan Securities plcKarishma Manpuria, CFA(91-22) 6157-4115karishma.manpuria@jpmchase.comJ.P. Morgan India Private LimitedAnamil Kochar, CFA(91-22) 6157-5179anamil.kochar@jpmchase.comJ.P. Morgan India Private LimitedQ4 �23 Results snapshotSPXSXXPSXXETPX% cos reported60%33%24%58%% cos beating EPS78%50%54%56%EPS %y/y5%-8%-5%4%% cos beating Sales56%39%34%51%Sales %y/y4%-7%-2%3%Source: Bloomberg Finance L.P., J.P. Morgan•We are more than halfway through the Q4 reporting season in the US, with 60% of companies having reported. In Europe, 33% of companies have released Q4 earnings so far. Earnings growth is tracking at +5% y/y in the US, and -8% y/y in Europe. Post a period of substantial downgrades to S&P500 EPS estimates into the earnings season, S&P500 blended Q4 EPS has inflected higher, as per usual - see Fig 1. •US: 78% of S&P500 companies that have reported beat EPS estimates. EPS growth for these companies is at +5% y/y, surprising positively by 8%. At a sector level, Discretionary, Tech and Communication Services stand out for their robust earnings delivery, while Commodity sectors and Healthcare have been weaker . Topline growth is coming in at +4% y/y, surprising positively by 2%.•Europe: Of the Stoxx600 companies that have reported so far, half have beaten EPS estimates. Q4 looks to be another weak quarter in Europe, with EPS growth at -8% y/y, surprising negatively by 4%. Commodity sectors and Industrials are the biggest drag to overall earnings. Revenue growth is at -7% y/y, surprising positively by 3%. •Japan: 56% of Topix companies beat EPS estimates, with overall EPS growth at +4% y/y. Revenue growth is at +3% y/y, and 51% of companies are beating sales estimates.•At a regional level, US earnings and sales delivery is significantly outpacing that of Europe. US vs Europe EPS growth stands at +13% y/y for the 2nd quarter in a row. The rebound in US vs European earnings that started mid last year, and post the soft 2022 patch, is supportive of our preference for US over European equities, which we initiated in May of last year - see Fig 2. In addition, we note that US vs Europe sales beats have continued to trend higher - see Fig 14. Figure 1: S&P500 blended Q4�23 EPS %y/y2%3%4%5%6%7%8%9%10%11%12%Jan-23Mar-23May-23Jul-23Sep-23Nov-23Jan-24S&P500 Blended 4Q '23e EPS, %y/ySource: Thomson ReutersFigure 2: SPX vs SXXP EPS Growth and performance10%-3%10%18%12%12%-4%-3%-28%-12%-22%-12%-11%3%13%13%100.0105.0110.0115.0120.0125.0-40%-30%-20%-10%0%10%20%1Q'203Q'201Q'213Q'211Q'223Q'221Q'233Q23S&P500 EPS Growth minus Stoxx600 EPS GrowthSPX...
