This Week in Earnings – Q1'23

Yesterday, we published our 31st issue of our Inside The Buy-Side® Industrial Sentiment Survey® – for the Q4’22 earnings season. Our Survey finds a mixed bag of industrial investor sentiment, but at less downbeat levels quarter-over-quarter. Expectations are for low-single-digit 2023 organic growth while growth investments garner increased support.

Key Themes

• Bearish sentiment on industrials thaws somewhat QoQ, but outlook remains tepid amid expectations for a challenging environment; FCF growth a bright spot
• With broad-based industrial weakness forecasted for 1H23, investors remain focused on expense management and strategic reinvestment
• Pronounced “in favor” and “out of favor” findings: North America remains a highlight while concerns over China’s long-term viability for U.S.-based companies grows

And as we do every earnings season, this week we’re covering U.S. Banks in our Sector Beat

Key Takeaways

• 2022 concluded a dynamic year for U.S. Banks amid continued inflation, recessionary concerns, and unprecedented interest rate actions. Despite benefitting from increased trading volatility, most reported steep drops in investment banking fees due to dismal deal activity and underwriting opportunities, with some initiating compensation cuts and/or layoffs.
• While nearly all banks are baking in a recession for 2023, expectations are that it will be “mild”, and most expect rates to peak in Q1, at 5.0%, and pivot before year end. As a result, many expect an uptick in deal activity once additional confidence is restored.
• Consumer spending volumes continued to grow through the end of 2022; however, executives report levels are beginning to “normalize” and lower-income customers are digging deeper into their savings accounts.
• Bank executives uniformly acknowledge we are heading into choppy waters in 2023.