Earnings season reality might be about to bite

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Slowing economic growth has started bleeding into profit downgrades for 2024. Investors could be in for a volatile earnings season.

and announced it would slow production, cut management and manufacturing jobs, and try to become more efficient through better technology, upgrading software and IT.David Rowe

Macquarie expects 2023 financial-year earnings growth, which had been forecast to be as high as 15 per cent, is likely to come in at an anaemic 0.7 per cent. UBS strategist Richard Schellbach says there are four key questions that investors need to answer as attention turns to “a decelerating economy, a strained consumer, and the lagged effect from the Reserve Bank’s hiking cycle which began a year ago”.noted monetary policy is now “clearly restrictive”, but the lingering worries about rising rents, electricity prices and wages have most economists expecting at least one more rate rise in August.

He also argues the potential for higher-than-expected interest costs to surprise due to higher short-term rates is real. “And in an environment where revenue and margins remain on the back foot, the erosion this causes to bottom-line earnings becomes increasingly harder to hide, and will also be in focus.”

 

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