First-quarter earnings: Winners to look out for
Earnings season is round the corner. Beginning next week, companies will announce their January-March fourth quarter financial statements. However, the picture clearly is not rosy. Analysts expect the Sensex-30 companies to report a poor quarter due to slow economic recovery process and weak demand environment, thereby disappointing investors.
Earnings growth is expected to remain flat. Therefore, a downgrade in earnings’ estimates for the forthcoming quarters is also likely. Also, an uptick in earnings could take at least three more quarters, according to brokerage firms.
Energy, industrials, metals and mining sectors are the probable ones to be worst hit. In such an environment, sectors may prove to be the bright spots and bring cheer to markets and investors.
Here is what you need to know:
1)Banking: Banking sector is likely to post a positive set of numbers for the fourth quarter. The sector could see a 11% year-on-year growth in net profit led by higher contribution from treasury income, according a report by Kotak Securities. Treasury income is the income banks earn from investing their surplus funds in government bonds. The brokerage firm also expects a YoY revenue growth of 12% for the banks.
Within the banking sector, private banks may report 15% growth on year-on-year terms in net profits, whereas public sector banks may show a negative growth of -6% YoY. Public sector banks have been saddled with rising bad loans and non-performing assets as economic growth is yet to witness a major uptick.
2)Consumer products: FMCG companies could put up a decent show in Q4 FY15. Kotak Securities expects 9% YoY growth in revenues in the sector. Profit after Tax (PAT) is likely to come in at 16.7% for the quarter—the strongest in the past eight quarters. Overall, EBITDA (Earnings before interest, taxes, depreciation, and amortization) is likely to show 18.7% growth, according to the report. EBITDA helps measure how much profit the company makes from its core operations. This growth is because of robust retail margins. Retail margin is difference between the price at which a company pays for an article (Cost Price) and the price at which it sells it to the customer (Selling Price). EBITDA indicates the operating efficiency of a company.
Within the sector, Asian Paints, Britannia, Bajaj Corp., Jyothy Laboratories ltd and Pidilite are expected to post strong earnings growth. On the other hand, Jubilant Foodworks, SRL, Tata Global Beverages and Titan are likely to see muted earnings.
3) Telecom: Telecom sector ispoised toa big winner in this earnings season. The sector’s revenues are projected to grow at 11%. In addition, EBITDA margins could expand by 1.75-2% YoY, according to a Crisil report quoted in Business Today. Internet data business of the telecom companies could continue to sustain the strong momentum. There were 173 million mobile Internet users in India as of December 2014. This number is expected to reach 213 million by June 2015, a 23% jump over six months, according to media reports. Within the sector, Bharti Airtel and Idea may report good growth in earnings.
4) Pharma: Pharmaceuticals companies are likely to post strong earnings this quarter. Revenues of pharma companies are expected to rise by a stellar 10%, according to a Crisil report quoted in Business Today. The US is a major market for the India pharma companies. With the country witnessing a strong economic recovery, sales from the US combined with pricing benefits would be a key growth driver. Lupin, Dr Reddy and Sun Pharma are expected to see a surge in US sales numbers.
5) Auto: Companies in automobile sector can look forward to a good quarter. Auto companies could report a 1.60% year-on-year improvement in EBITDA margin, according to a Kotak Securities report. EBIDTA margin helps measure the company’s profitability from its core operations. The growth would be on account of a positive impact of currency movement and a richer product mix. Among the top companies in the sector, Bajaj Auto and Mahindra & Mahindra are likely to report a sharp YoY decline in earnings. However, Hero Motocorp and Maruti Suzuki are likely to see strong earnings growth.
Happy Investing
Earnings season is round the corner. Beginning next week, companies will announce their January-March fourth quarter financial statements. However, the picture clearly is not rosy. Analysts expect the Sensex-30 companies to report a poor quarter due to slow economic recovery process and weak demand environment, thereby disappointing investors.
Earnings growth is expected to remain flat. Therefore, a downgrade in earnings’ estimates for the forthcoming quarters is also likely. Also, an uptick in earnings could take at least three more quarters, according to brokerage firms.
Energy, industrials, metals and mining sectors are the probable ones to be worst hit. In such an environment, sectors may prove to be the bright spots and bring cheer to markets and investors.
Here is what you need to know:
1)Banking: Banking sector is likely to post a positive set of numbers for the fourth quarter. The sector could see a 11% year-on-year growth in net profit led by higher contribution from treasury income, according a report by Kotak Securities. Treasury income is the income banks earn from investing their surplus funds in government bonds. The brokerage firm also expects a YoY revenue growth of 12% for the banks.
Within the banking sector, private banks may report 15% growth on year-on-year terms in net profits, whereas public sector banks may show a negative growth of -6% YoY. Public sector banks have been saddled with rising bad loans and non-performing assets as economic growth is yet to witness a major uptick.
2)Consumer products: FMCG companies could put up a decent show in Q4 FY15. Kotak Securities expects 9% YoY growth in revenues in the sector. Profit after Tax (PAT) is likely to come in at 16.7% for the quarter—the strongest in the past eight quarters. Overall, EBITDA (Earnings before interest, taxes, depreciation, and amortization) is likely to show 18.7% growth, according to the report. EBITDA helps measure how much profit the company makes from its core operations. This growth is because of robust retail margins. Retail margin is difference between the price at which a company pays for an article (Cost Price) and the price at which it sells it to the customer (Selling Price). EBITDA indicates the operating efficiency of a company.
Within the sector, Asian Paints, Britannia, Bajaj Corp., Jyothy Laboratories ltd and Pidilite are expected to post strong earnings growth. On the other hand, Jubilant Foodworks, SRL, Tata Global Beverages and Titan are likely to see muted earnings.
3) Telecom: Telecom sector ispoised toa big winner in this earnings season. The sector’s revenues are projected to grow at 11%. In addition, EBITDA margins could expand by 1.75-2% YoY, according to a Crisil report quoted in Business Today. Internet data business of the telecom companies could continue to sustain the strong momentum. There were 173 million mobile Internet users in India as of December 2014. This number is expected to reach 213 million by June 2015, a 23% jump over six months, according to media reports. Within the sector, Bharti Airtel and Idea may report good growth in earnings.
4) Pharma: Pharmaceuticals companies are likely to post strong earnings this quarter. Revenues of pharma companies are expected to rise by a stellar 10%, according to a Crisil report quoted in Business Today. The US is a major market for the India pharma companies. With the country witnessing a strong economic recovery, sales from the US combined with pricing benefits would be a key growth driver. Lupin, Dr Reddy and Sun Pharma are expected to see a surge in US sales numbers.
5) Auto: Companies in automobile sector can look forward to a good quarter. Auto companies could report a 1.60% year-on-year improvement in EBITDA margin, according to a Kotak Securities report. EBIDTA margin helps measure the company’s profitability from its core operations. The growth would be on account of a positive impact of currency movement and a richer product mix. Among the top companies in the sector, Bajaj Auto and Mahindra & Mahindra are likely to report a sharp YoY decline in earnings. However, Hero Motocorp and Maruti Suzuki are likely to see strong earnings growth.
Happy Investing
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