Global Markets Strategy23 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 reported82%55%45%94%% cos beating EPS77%52%58%55%EPS %y/y7%-11%-7%10%% cos beating Sales57%37%33%50%Sales %y/y4%-7%-6%2%Source: Bloomberg Finance L.P., J.P. Morgan•Over 80% of S&P500 companies and 55% of Stoxx600 companies have now reported Q4 results. EPS growth for the quarter is tracking at +7% y/y in the US, and -11% y/y in Europe. The divergence in earnings delivery between the US and Europe is becoming more apparent, where US minus Europe EPS growth has widened to highs - see Fig 2. On aggregate, US companies strongly beat expectations, with EPS surprise factor at +8%, while European companies have disappointed vs consensus expectations by 2%. The better showing in the US has supported the meaningful outperformance of US vs European equities since mid last year, and is consistent with our regional US over Europe preference, initiated in May �23. •US: 77% of S&P500 companies that have reported beat EPS estimates. With the exception of Tesla, Magnificent 7 stocks have had another stellar quarter: Communication Services, Tech and Discretionary are the largest contributors to Q4 EPS growth - see Fig 1. Excluding Magnificent 7, S&P500 EPS growth stands at -4% y/y for the quarter. On the other side, Commodity sectors and Healthcare are weaker. 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 -11% y/y, surprising negatively by 2%. Commodity sectors and Industrials are the biggest drag to overall earnings, where ex- Energy EPS growth stands at +1% y/y. Revenue growth is printing at -7% y/y, surprising positively by 1%. •Japan: 55% of Topix companies beat EPS estimates, with overall EPS growth at +10% y/y. Revenue growth is at +2% y/y, and 50% of companies are beating sales estimates.•As a result of the strong reporting season beats, S&P500 Q4 blended EPS has inflected higher - see Fig 3, but this is only unwinding the Nov-Dec downgrades. Also, looking ahead to 2024 full year outlooks, we note that a much smaller proportion of US companies are raising EPS guidance this quarter, well below the historical median - see Fig 15. Figure 1: S&P500 sector contribution to Q4 �23 earnings growth4.9%4.0%1.7%0.8%0.6%0.4%0.2%0.1%-...
