Canada Earnings Season Review: Q2 2023

At this late stage of the Q2 earnings season for the S&P/TSX Composite, both the number of companies reporting positive earnings surprises and the magnitude of these earnings surprises are above average. However, on a year-over-year basis, the S&P/TSX Composite is still reporting its largest (year-over-year) decline in earnings since 2020.

Overall, 93% of the companies in the S&P/TSX Composite have reported actual results for Q2 2023 to date. Of these companies, 60% have reported actual EPS above estimates, which is above the five-year average of 54%. In aggregate, companies are reporting earnings that are 5.2% above estimates, which is above the five-year average of -2.3%.

The blended (combines actual results for companies that have reported and estimated results for companies that have yet to report) earnings decline for the second quarter is -19.1% today, compared to an estimated earnings decline of -17.4% at the end of the second quarter (June 30).

If -19.1% is the actual decline for the quarter, it will mark the largest (year-over-year) decline in earnings reported by the index since Q3 2020. It will also mark the third straight quarter that the index has reported a year-over-year decrease in earnings.

Five of the eleven sectors are reporting (or have reported) year-over-year earnings growth, led by the Information Technology sector. On the other hand, five sectors are reporting (or have reported) 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 the year-ago quarter. However, the sector reported a profit for Q2 2023 compared to a loss for Q2 2022.

Looking ahead, analysts expect a decline in earnings of -10.7% in Q3 2023 but growth in earnings of 2.6% in Q4 2023. For all of CY 2023, analysts are predicting a decline in earnings of -10.0%.

The forward 12-month P/E ratio is 13.0, which is below the 5-year average (14.7) and below the 10-year average (15.2).

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