Global Markets Strategy16 February 2024J P M O R G A Nwww.jpmorganmarkets.comHead of Global Equity 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 reported72%46%34%94%% cos beating EPS78%52%56%55%EPS %y/y5%-8%-4%8%% cos beating Sales57%38%34%50%Sales %y/y4%-6%-2%3%Source: Bloomberg Finance L.P., J.P. Morgan•We are entering the final stages of the reporting season in the US, with nearly 75% of companies having reported. In Europe, we are halfway through, where 46% have released Q4 earnings. EPS growth in Europe continues to underwhelm vs the US, for the third quarter in a row - see Fig 13, and US vs Europe sales beats keep trending higher - see Fig 14. This is coinciding with the strong outperformance of US vs European equities since mid last year. The EPS surprise factor is strongly positive in the US; consequently, S&P500 Q4 blended EPS has inflected higher - see Fig 3. In contrast, earnings in Europe are surprising to the downside. This is supportive of our preference for US over European equities, which we initiated in May �23. •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%. Crucially, the bulk of earnings growth can be attributed to Communication Services , Tech and Discretionary - see Fig 1. If one were to exclude the Magnificent 7 stocks� Q4 earnings results, EPS growth for the US is at -4% y/y. On the other side, Commodity sectors and Healthcare are weaker this quarter. Topline growth is coming in at +4% y/y, surprising positively by 1%.•Europe: Of the Stoxx600 companies that have reported so far, 52% beat EPS estimates. Q4 EPS growth is coming in at -8% y/y, surprising negatively by 3%. Commodity sectors and Industrials are the biggest drag to overall earnings, where ex- Energy EPS growth stands at +4% y/y. Revenue growth is -6% y/y, surprising positively by 2%. •Japan: 55% of Topix companies beat EPS estimates, with overall EPS growth at +8% y/y. Revenue growth is at +3% y/y, and 50% of companies are beating sales estimates.•Notably, a smaller proportion of US companies are raising EPS guidance this quarter - the lowest since 2020, and well below the historical median - see Fig 2. Figure 1: S&P500 sector contribution to Q4 �23 earnings growth - Magnificent 7 are responsible for all the growth, and more4.3%2.6%1.9%0.8%0.7%0.2%0.1%0.1%-0.6%-2.5%-2.7%4.8%0%2%4%6%8%10%12%Comm. SrvcsITDiscr...
