What they say on June quarter results

With the June earnings season nearing its close, leading brokerages and FIIs have been reacting to the hits and misses of the season. The consensus now seems to be that results have come in below expectations, causing some brokers to revisit their earnings estimates for FY12 & FY13.

Sharekhan : “The earnings growth of the Sensex companies in Q1FY2012 was marginally lower than expected. During the quarter the aggregate adjusted earnings of the Sensex companies grew 7.5 per cent year-on-year (Y-o-Y) compared to our expectation of a 9.5 per cent year-on-year (Y-o-Y) growth. This was because of the lower than expected performance of the pharmaceutical (pharma; Cipla), telecommunications (telecom; especially Bharti Airtel) and metal stocks. However, the shortfall in the earnings vis-a-vis our estimate was partly offset by a strong growth in the information technology (IT) services and fast moving consumer goods (FMCG) sectors and other stocks (JP Associates, Maruti Suzuki).’’

Macquarie Reserach : “In uncertain markets such as what we have now, emotions often gain influence on investors’ decisions. We are thus reminded of the famous quote from Mark Twain: “Get your facts first, then you can distort them as you please.’’ This week, we look at the recently completed earnings season and see what the numbers have to tell us.

“In Q1FY2012, Sensex companies reported 20 per cent of Macq analysts’ full-year estimates, while the five-year average is upwards of 23 per cent. Q2 does not look any better and hence we would think there is more downside, though we have already seen FY12 EPS down from Rs 1,270 to Rs 1,200 in the last six months. Overall across our coverage universe, PAT growth came in at just 9 per cent Y-o-Y, missing our estimate by 6 per cent, while margins saw a 100bp drop. While most sectors were under pressure, we see some bright spots with earnings upgrades and potential to outperform — BPCL, GNP, ITC, SUNP and TCS.’’

Morgan Stanley: “F2012 earnings growth forecast is unchanged at 18 per cent. Consensus is expecting 20 per cent and 17 per cent growth for F2012 and F2013, respectively. Earnings have support from decade-low gross margins and strong balance sheets, but face headwinds from fragile global growth. We think broad market earnings growth may have troughed. Following the cut in absolute targets by our fellow strategists....our new Sensex target for Dec-11 is down 15 per cent to 18,850. We roll out our Dec-12 target at 22,750. The Dec-12 target implies P/E multiples of 18x and 16x on F2012 and F2013 earnings, respectively.’’