Q1'24 Inside The Buy-Side® Earnings Primer®

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Closing the Quarter Q3’23

With Q3 2023 earnings season in the books, we “Close the Quarter” with some notable themes:

Overall Performance

Stronger-than-expected S&P 500 Q3 EPS prints (~83% beat vs consensus) result in more than half of companies seeing estimate increases through the end of the year, while roughly one-third experience revenue expectation cuts despite 60% beating consensus.

Consensus Trends

  • Revenue: 27% increase, 41% no change, 32% decrease
  • EPS: 52% increase, 21% no change, 27% decrease

Guidance

Based on a universe of over 750 companies we track every quarter, more companies raised guidance versus maintained or lowered, with EPS seeing a slightly higher number of increases over revenue.

Guidance Shifts

  • Revenue: 38% raised, 33% maintained, 29% lowered
  • EPS: 42% raised, 27% maintained, 31% lowered

Capital Allocation

Sequential cash uses indicate renewed interest in buybacks and M&A, though both increases continue to be overshadowed by their negative YoY comparisons.

S&P 500 Sequential Uses of Cash

  • +12.8% buybacks
  • +12.0% M&A
  • 1.9% capex
  • +0.9% dry powder
  • -0.9% debt paydown
  • -3.6% dividends

Earnings: Stronger-than-expected Q3 EPS prints result in consensus raises through the end of the year, while roughly one-third cut revenue expectations.

Chart: Percentage of S&P 500 Beating Earnings Estimates

Guidance: More companies across the broader U.S. universe are raising annual EPS guidance than they are revenue for 2023, though both metrics saw the majority of companies increasing. Still, roughly 30% decreased top- and/or bottom-line guides through Q3. 

Chart: All Company 2023 Guidance
Chart: S&P 500 2023 Consensus Revisions

Corbin Advisors is a strategic consultancy accelerating value realization globally. We engage deeply with our clients to assess, architect, activate, and accelerate value realization, delivering research-based insights and execution excellence through a cultivated and caring team of experts with deep sector and situational experience, a best practice approach, and an outperformance mindset.

Capital Allocation: Sequential cash uses indicate renewed interest in buybacks and M&A, though both increases continue to be overshadowed by their negative YoY comparisons.

Chart S%P 500 Q3'23 Capital Allocation - Aggregate

Outlook

Despite continued consensus beats, which can give an illusion of strength, outlooks are mixed, at best, and executive commentary is increasingly cautious amidst pervasive uncertainty

  • Geopolitics: Executives continue to express caution as the latest injection of geopolitical uncertainty further weighs on sentiment; “there are reasons to remain vigilant”
  • Growth: Reduced discretionary spending is amplified by reluctance to restock inventory, with executives warning of mixed signals through the beginning of Q4
  • Margins: Despite lower demand and signs of downward pricing pressure, companies largely hold firm on margin rates, helped by pockets of deflation
  • Consumer Health: Consumers pull the purse strings tighter; executives point to leaner spending habits and trade-down activity, particularly among lower income shoppers, as the compounding effects of inflation, debt, and student loan payments weigh on sentiment
  • China: Companies report mixed performances and ongoing geopolitical tensions as factors marring results; even companies with longstanding ties to the country continue to redirect new investment towards alternative regional substitutes
  • Europe: Executives see some encouraging signs and cite stable demand (albeit, more moderate than the U.S.); inflation and geopolitical uncertainty remain significant headwinds

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© 2024 Corbin Advisors. 
All Rights Reserved.
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