UBS is calling for a bigger drop than even the downbeat consensus estimates.Corporate earnings will fall short of a low bar in the Q2 reporting period, according to UBS, though the firm believes that a handful of companies are set to crush consensus estimates.
"The bar for earnings remains low, but we still see a small miss of less than 1% for Q2 EPS reporting, as compared to the historical median beat of ~3%," wrote a team of UBS strategists headlined by Sean Simonds in a mid-July note. Pressure on earnings is coming from all sides. Sales growth is steadily slipping and is expected to be flat in Q2, while margins are suffering under the weight of wage inflation and lower pricing power, Simonds wrote. He added that UBS's margin signal proxy is down"significantly" in Q2.The silver lining for investors is that Q2 should be the trough for earnings, according to UBS.
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