FactSet Insight - Commentary and research from our desk to yours

Canada Earnings Season Preview: Q2 2023

Written by John Butters | Jul 20, 2023

Analysts lowered their earnings estimates more than average for the second quarter for companies in the S&P/TSX Composite. On a per-share basis, estimated earnings for the second quarter decreased by 4.8% from March 31 to June 30. This decline was larger than the 5-year average (-2.1%), the 10-year average  (-3.2%), the 15-year average (-4.7%), and the 20-year average (-3.8%) for a quarter.

At the sector level, eight of the eleven sectors recorded a decline in estimated earnings during the quarter, led by the Materials (-11.7%), Energy (-10.2%), and Utilities (-8.7%) sectors.

Because of the net downward revisions to earnings estimates, the estimated (year-over-year) earnings decline for Q2 2023 is larger now relative to the start of the second quarter. As of today, the S&P/TSX Composite is expected to report a (year-over-year) earnings decline of -20.4%, compared to the estimated (year-over-year) earnings decline of -17.4% on June 30 and the estimated (year-over-year) earnings decline of -12.5% on March 31.

If -20.4% 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 third straight quarter in which the index has reported a year-over-year decline in earnings.

Four of the eleven sectors are projected to report year-over-year earnings growth, led by the Information Technology (35.5%) and Financials (12.4%) sectors. On the other hand, six sectors are predicted to report a year-over-year decline in earnings, led by the Energy (-53.8%) and Materials (-50.4%) sectors. A growth rate is not being calculated for the Health Care sector due to the loss reported by the sector in Q2 2022.

Looking ahead, analysts expect a decline in earnings of -7.9% in Q3 2023 but growth in earnings of 2.9% in Q4 2023. For all of CY 2023, analysts are predicting a decline in earnings of -9.6%.

The forward 12-month P/E ratio is 13.4, which is below the 5-year average (14.7) and below the 10-year average (15.2).

The peak weeks of the Q2 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 second quarter.

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.