Earnings Watch: Q3 earnings season is coming to an end Earnings Watch: Q3 earnings season is coming to an end Earnings Watch: Q3 earnings season is coming to an end

Earnings Watch: Q3 earnings season is coming to an end

Equities 6 minutes to read
Peter Garnry

Head of Equity Strategy

Summary:  In today's equity update we sum up the Q3 earnings season which has now ended in the US and Europe. Earnings and margin compression have been the worst in Europe and China, while US companies have seen less pressure but still lower earnings q/q in Q3 and the weakest earnings season in two years. We expect the margin pressure to continue causing headwinds for earnings growth next year. We also go through the key earnings releases next week with the most important companies reporting being Pinduoduo, Salesforce, and Snowflake.


Was Q3 margin pressure the canary in the coal mine?

With 97% of the companies in S&P 500 having reported the Q3 earnings season is definitively over and we can now begin to make firm conclusions about what is going on with earnings. S&P 500 earnings were down 2.5% q/q making Q3 the worst earnings season since the market bounced back from the abyss during the early days of the pandemic. European and Chinese earnings have been even worse declining around 9% q/q driven by more intense margin pressures than observed in the US. On revenue European companies did the best with revenue up 6.7% q/q compared to only 3.9%b q/q for S&P 500. The average q/q revenue growth rate the past two years is 5.3% in Europe and 3.5% in the US. Part of the difference can be explained by the stronger USD. As we have writing many times this month, the key dynamic for equities next year is the evolution of operating margin and if they go down to average levels in the past then headwinds will be too much for companies and lower earnings next year will likely follow.

Salesforce and Snowflake is seeing growth cooling down

Next week’s earnings releases are highlighted below. Pinduoduo on Monday is the key earnings focus in China with analysts expecting Q3 revenue growth of 44% y/y and the EBITDA margin staying at healthy levels around 21.2%. The main menu next week is on Wednesday with earnings from US technology companies Salesforce and Snowflake. Analysts expect Salesforce FY23 Q3 (ending 31 October) revenue growth to decline to 14% y/y down from 27% y/y a year ago and analysts expect Snowflake to report FY23 Q3 (ending 31 October) revenue growth of 61% y/y down from 110% y/y a year ago. Expectations for both companies highlight the slowdown in technology enterprise spending that we have seen from other technology companies including Intel, HP etc.

  • Monday: Pinduoduo, Capitaland, H World Group
  • Tuesday: Li Auto, DiDi Global, Bank of Nova Scotia, Intuit, Workday, Crowdstrike, HP Enterprise, NetApp, Shaw Communication
  • Wednesday: Royal Bank of Canada, National Bank of Canada, Salesforce, Synopsys, Snowflake, Splunk, Hormel Foods, KE Holdings
  • Thursday: Canadian Imperial Bank of Commerce, Bank of Montreal, Toronto-Dominion Bank, Marvell Technology, Veeva Systems, Ulta Beauty, Zscaler, Dollar General, Kroger
Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
- Full disclaimer (https://www.home.saxo/en-mena/legal/disclaimer/saxo-disclaimer)


Boulevard Plaza, Tower 1, 30th floor, office 3002
Downtown, P.O. Box 33641 Dubai, UAE

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.