Featured Image

Canada Earnings Season Preview: Q1 2023

Earnings

By John Butters  |  April 20, 2023

Analysts lowered their earnings estimates more than average for the first quarter for companies in the S&P/TSX Composite. On a per-share basis, estimated earnings for the first quarter decreased by 8.9% from December 31 to March 31. This decline was larger than the 5-year average (-1.6%), the 10-year average (-3.1%), the 15-year average (-4.6%), and the 20-year average (-3.6%) for a quarter. The first quarter also marked the largest decline in the quarterly EPS estimate since Q2 2020 (-36.7%). At the sector level, 10 of the 11 sectors recorded a decline in estimated earnings during the quarter, led by the Energy (-20.9%), Materials (-17.6%), and Consumer Discretionary (-16.2%) sectors.

Because of the net downward revisions to earnings estimates, the estimated (year-over-year) earnings decline for Q1 2023 is larger now relative to the start of the first quarter. As of today, the S&P/TSX Composite is expected to report a (year-over-year) earnings decline of -16.4%, compared to the estimated (year-over-year) earnings decline of -11.7% on March 31 and the estimated (year-over-year) earnings decline of -4.0% on December 31.

If -16.4% is the actual decline for the quarter, it will mark the largest earnings decline reported by the index since Q3 2020. It will also mark the second straight quarter in which the index has reported a year-over-year decline in earnings. Three of the eleven sectors are projected to report year-over-year earnings growth, led by the Industrials sector. On the other hand, seven sectors are predicted to report a year-over-year decline in earnings, led by the Materials and Energy sectors. A growth rate is not being calculated for the Health Care sector due to the loss reported by the sector in Q1 2022.

Looking ahead, analysts expect declines in earnings of -10.2% and -2.9% for Q2 2023 and Q3 2023, respectively. However, analysts expect the index to report earnings growth 7.6% for Q4 2023. For all of CY 2023, analysts are predicting a decline in earnings of -5.3%.

The forward 12-month P/E ratio is 13.6, which is below the 5-year average (14.8) and below the 10-year average (15.2).

The peak weeks of the Q1 2023 earnings season for the S&P/TSX Composite start next week. Over the next four weeks, about 200 companies in the index are expected to report results for the first quarter.

01-sp-tsx-composite-q1-2023-bottom-up-eps-1-year

02-1-sp-tsx-composite-earnings-growth-q1-2023

This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.

Subscribe to FactSet Insight

John Butters

Vice President, Senior Earnings Analyst

Mr. John Butters is Vice President and Senior Earnings Analyst at FactSet. His weekly research report, “Earnings Insight,” provides analysis and commentary on trends in corporate earnings data for the S&P 500 including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, The Financial Times, The New York Times, MarketWatch, and Yahoo! Finance. Mr. Butters has over 15 years of experience in the financial services industry. Prior to FactSet in January 2011, he worked for more than 10 years at Thomson Reuters (Thomson Financial), most recently as Director of U.S. Earnings Research (2007-2010).

Comments

The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.