Sharp rise in results and stock market performance By Investing.com

Sharp rise in results and stock market performance By Investing.com
Sharp rise in results and stock market performance By Investing.com

As earnings season unfolds, analysis of Morgan Stanley (NYSE:) reveals an impressive trend: three-quarters of the companies in their coverage universe beat earnings estimates, signaling robust performance in both depth and breadth. With earnings beating estimates by 6 percentage points (ppt) and a magnitude of 56%, the market reaction, reflected in strong stock price performance following the earnings release, indicates that expectations have been exceeded in various sectors.

Examining the performance of companies in the universe covered by Morgan Stanley, excluding oil PSUs, reveals notable growth figures. Year-on-year growth rates for revenue, EBITDA, profit before tax (PBT) and net profit are 11%, 15%, 17% and 22%, respectively. with exceedances ranging from 1ppt to 12ppt compared to analysts’ expectations. However, excluding Tata Motors (NS:), year-on-year earnings growth stands at 15%, bringing the growth rate down to 6 points. Margin expansion is seen in five of the nine sectors that have reported results so far.

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Earnings and stock performance dispersion reached its highest level since September 2020, with positive trends in both the sequential earnings beat ratio and relative stock performance versus . Notable sectors with strong profit growth include automobiles, public sector banks and gas utilities, while chemicals recorded the highest decline in profits. Construction materials, automobiles, public sector banks and telecom are the best performers compared to analysts’ expectations, while energy and metals are laggards. Margin expansion is most pronounced in the utilities (led by gas) and consumer discretionary sectors, while energy records the largest contraction.

Analyzing the performance of companies in the Sensex and , Morgan Stanley finds that revenue and net profit growth rates are meeting or exceeding expectations. Stocks in the Sensex are reporting revenue, EBITDA and net profit growth of 11%, 16% and 22%, respectively, while companies in the Nifty are reporting growth rates of 10%, 14%. and 20% compared to the previous year. Margin expansion is observed in both indices.

Looking at overall market trends, more than 50% of the sample of reporting companies, or 1,055 companies, reveal revenue and net profit growth of 8% and 21% year-on-year, respectively, with margin expansion of 65 basis points. Excluding the financial sector, revenue and net profit growth rates are 7% and 16% year-on-year, respectively, with margin expansion of 49 basis points.

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X (formerly, Twitter (NYSE:)) – Aayush Khanna

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