As earnings season unfolds, Morgan Stanley The (NYSE:) analysis revealed an impressive trend: three-quarters of the companies in their coverage beat earnings estimates, indicating robust performance in both depth and breadth. With earnings beating forecasts by 6 percentage points (pp) at 56%, the market reaction reflected in the strong post-earnings share price performance indicates that expectations were exceeded across various sectors.
An analysis of the performance of companies covered by Morgan Stanley, excluding Oil PSU, shows remarkable growth rates. On an annualized (year-on-year) basis, revenue, EBITDA, profit before tax (PBT) and net profit growth rates are 11%, 15%, 17% and 22%, respectively, ranging from 1pp to 12pp year-on-year. analysts’ expectations. However, excluding Tata Motors (NS:), the YoY profit growth is 15%, which reduces the pace to 6pp. Margin increases were seen in five of the nine sectors reporting so far.
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The spread of earnings and stock performance is at its highest level since September 2020, with positive trends in both the sequential earnings beat ratio and relative stock performance relative to the index. Notable sectors with strong earnings growth include automobiles, public sector banks and natural gas, while chemicals saw the largest decline in earnings. Construction materials, automobiles, public sector banks and telecom led the way, contrary to analysts’ expectations, while energy and metals lagged. The gains in profitability are most pronounced in utilities (led by gas) and consumer services, while energy saw the largest declines.
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Reviewing Sensex and corporate performance, Morgan Stanley concluded that revenue and net profit growth rates were in line with or above expectations. Sensex stocks reported revenue, EBITDA and net profit growth of 11%, 16% and 22% respectively, while Nifty stocks posted growth rates of 10%, 14% and 20% YoY. An increase in margin is observed for both indices.
Looking at broader market trends, more than 50% of the sample of 1,055 companies showed revenue and net income growth of 8% and 21% YoY respectively, with margins increasing by 65 bps. Excluding the financial sector, revenue and net profit growth rates are 7% and 16% YoY, respectively, with margin growth of 49 bps.
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