Companies' results for the fourth quarter - what can we expect?

The season of publication of US companies' results for the fourth quarter has started. Banks went first, the results of which turned out to be inconclusive. However, the entire season should be positive - the market predicts an increase in the profits of companies from the S & P4 index by 500 percent, and European companies from the Stoxx20 by 600 percent. and British companies by as much as 50 percent.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.

Mixed data, as are moods

Financial institutions: JPMorgan Chase, Citigroup, Blackrock and Wells Fargo. JPMorgan Chase's results turned out to be better than expected, but the bank's share fell by more than 6%. as a result of concerns about worse results in 2022. The bank reported that it might not be able to achieve mid-term profitability ratios. This is due to the rapid increase in the costs of running a business, primarily rising labor costs in the US. Throughout 2021, the bank earned a record $ 48,3 billion.

Citi generated a profit of USD 4 billion in the fourth quarter, which was in line with analysts' expectations, however, it is a result of 3,2 percent. lower than in the corresponding period of 26, when the bank's profits amounted to 2020 billion dollars. The banks' results turned out to be ambiguous, but the industry's prospects, despite the increase in costs, seem to be good. It is worth noting that Americans' savings accumulated during the pandemic are slowly diminishing, and therefore the demand for loans is increasing. And as bond yields increase, interest margins will also rise.

The market expects worse results

Throughout the previous year, we observed an increase in market expectations as to the level of results - at the end of the year, expectations were by 23%. higher than at its beginning. We should expect a similar situation, though on a smaller scale, also now. The current forecasts for the companies' results for the fourth quarter are low and assume a 4% decline in the result. against the previous quarter. And this despite the higher GDP growth rate. The GDP growth rate for the fourth quarter, GDPNow, is now 5%, while the last reading for the third quarter was only 4%. Also record-breaking are the margins of enterprises, which find it much easier to raise their prices in an environment of high inflation. There are also fewer cases of the coronavirus, which also fosters a recovery in the economy. Therefore, there is room for a moderate breach of expectations, even after a moderate increase.

Currently, the market predicts that the increase in earnings of companies from S & P500 index will amount to 20 percent against the 4th quarter of 2020. Much higher profit growth is expected in Europe. Increase in earnings of 600 European companies on the index Stoxx600 is to be 50 percent. compared to the same quarter a year ago. British companies, which are to obtain 200 percent, are to generate an even higher increase. increase in profits. Against this background, the prospects for profit improvement by Polish companies also look good. Higher increases in profits of non-US companies are another argument for geographical diversification of the investment portfolio. And in the coming weeks, it is worth carefully following the results presented by the companies, as well as changes in profit forecasts for the coming quarters.