Reporting season in the USA: profit growth of more than 20% expected

The greater price fluctuations show that the festive mood of 2017 has disappeared from European stock markets. The DAX has also felt the effects of this, with a good four percent having already been lost this year. The S&P 500, on the other hand, is rapidly approaching its all-time high.

Economists fear possible consequences from US import duties. Nevertheless, the economic forecasts for global economic growth have not been significantly reduced until now. This is probably also due to the fact that around 80% of the expected global economic growth of 3.6% in 2018/19 will be driven by high-growth countries such as China, the USA and the emerging markets where the economies are still ticking over nicely.

The fundamental conditions have remained intact so far and corporate profits are growing noticeably worldwide. These are the findings of our analyses in the run-up to the companies‘ reporting for the second quarter of 2018.

In the USA in particular, the reporting season, which begins on Friday, should once again prove a source of joy for investors. In the first quarter reporting season, 55% of the S&P 500 companies had outstripped analysts‘ expectations – the best rate since the second quarter of 2010. The US government’s tax reform has created tailwind in 2018. Although this pace is unlikely to have been maintained in the second quarter, profits should still have risen by 20% compared with the same period last year. Company sales are expected to have risen by eight percent. Adjusted for tax effects, S&P 500 profits are still expected to have gained a good ten percent, with companies from the energy, technology and finance sectors again posting the highest profit growth. Growth is broadly based; almost all sectors – with the exception of automotive and conglomerates – expect earnings growth compared with the previous year. Most of these sectors are likely to show double-digit growth. The acceleration in earnings should be mainly attributable to the solid US economic growth which is reflected in particular in the three core sectors of finance, technology and oil.

In Europe, the reporting season will not start for another few weeks. Corporate profits in the Stoxx 600 are expected to have grown by a good eight percent in the past quarter; a large part of the earnings boost derived from the energy sector where the sharp rise in the price of crude oil sent corporate profits spiralling upwards. Corporate earnings in the DAX are likely to have increased by only between two and five percent compared with the same period last year. Weaker results at companies such as Deutsche Bank, RWE, Daimler and several others had already led to slight disappointments in the first quarter. This trend could now continue.

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