Q4'23 Inside The Buy-Side® Earnings Primer®

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Earnings Snap and Cons. Discretionary Sector Beat

  • With 78% of the S&P 500 reporting earnings to date, 64% have reported a positive revenue surprise, below the 1-year average of 71%.
  • Companies are reporting revenue 1.7% above consensus estimates, below the 1-year average (+2.5%) and slightly below the 5-year average (+2.0%). Continuing, 79% have reported a positive EPS surprise, above the 1-year average of 73%.
  • Companies are reporting earnings 7.1% above consensus estimates, well above the 1-year average of (+3.2%) but below the 5-year average (+8.4%). 

In this week’s Sector Beat, we analyzed annual revenue and EPS guidance provided by Consumer Discretionary companies with market caps greater than $500M that have reported to date.

A greater number of Consumer Discretionary companies are raising revenue guidance while a roughly even proportion are raising, maintaining, or lowering their annual EPS projections. 

  • EPS: 34% raised, 30% maintained, 36% lowered 
  • Revenue: 45% raised, 37% maintained, 18% lowered 

Further, we analyzed the earnings calls for this group and the broader consumer discretionary universe to identify key themes:  

  • Consumer Health: “Fairly Strong,” but Showing Signs of Softness; Resumption of Student Loan Payments is an Anticipated Headwind in the Coming Quarters, while Purchasing Behavior Indicates Clear Preferences for Services and Consumables vs. Durable Goods
  • Margins and Pricing: Q2 Margins Benefit from Lower Freight and Input Costs, Offset by Elevated Wage Pressures; As Elasticities Shift, Execs Toe the Line Between Volume and Price
  • Inventory: Proceeding with Caution, Wholesalers Limit Buys Amid Residual Inventory Glut
  • Inflation: While Inflation Appears to be Ebbing for Most, Many Continue to Point to Persistent Wage Pressures as Labor Conditions Remain Tight 
  • Regional Spotlight: Asia – Japan and India Demonstrate Strong Growth in Lieu of Companies De-Risking China; In Line with Industrial Commentary, the Expected Recovery in China Lagged Expectations 

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.

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