Fewer positive takeaways from results season so far

Written by fe Bureau | Mumbai | Updated: Jul 26 2014, 16:59pm hrs
Although the recent results season is in its early stage, the first quarter numbers of corporate India have so far brought more negative surprises. As per a Bloomberg compilation, the Q1 numbers of 60-odd companies have collectively trailed the Streets estimates by 7%, with about three-fifths of the universe disappointing the street.

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Companies from banking and financial sectors mainly failed to meet the Street expectations as private sector banks like HDFC Bank, Axis Bank and Yes Bank reported below-estimate earnings. While HDFC Bank reported lowest quarterly earnings growth of 21% in nearly a decade, net profit of Axis Bank missed estimates by 3%. Lower other income growth and higher operating expenses affected the profitability of the banks.

Amongst the other companies from the sector, Kotak Mahindra Bank, M &M Financial Services, South Indian Bank and Gruh Finance lagged analyst earnings estimates by 8% to 39% for the period.

While IT majors like TCS and Infosys managed to beat the Street estimates in a seasonally weak June quarter, Wipro results disappointed the markets both at the sales and earnings level by about 1%.

Among other bluechip stocks, Baja Auto numbers let the street down with a flat y-o-y earnings. At a 13.7% y-o-y growth, the net profit of Reliance Industries managed to meet the Street expectations. Lower interest and depreciation in expenditures supported net profit for the quarter even as companys Ebitda for the quarter was affected by higher expenditure and lower Ebit from its petrochem business.

Cairn India, Reliance Power, ACC, Oberoi Realty, Biocon, Hindustan Zinc and JSW Energy were among the largecap companies that reported below-estimate earnings. Technology companies, including Mastek, Polaris Financial Tech, KPIT Terchnologies, Thinksoft lobal Services, and Hexaware Technologies, missed Street earnings estimates.

Estimates peg Sensex earnings (earnings per share) to grow by 15-16% to R1,570/80 for FY15, the onus to meet this projection may lie on the subsequent three quarters if the dismal trend in earnings continues.

Overall, experts anticipated June quarter numbers to be an early indicator of a bottoming of earnings cycle even as they consider the trend in FY16 earning upgrades for valuing the market.

Various estimates released ahead of the results season pinned the earnings of the top-30 companies to grow 15% to 18% y-o-y in the three months to June while top line was seen expanding in the range of 14-16%. Export-oriented sectors, like IT and auto (Tata Motors), are again seen dominating the contribution to the Sensex earnings, even as ONGC and Bharti are likely to report strong profit numbers for the quarter.