Investors look for 2023 outlooks from companies as earnings season looms
Companies have been signalling a lacklustre earnings season for a wide variety of reasons, many of them global.
Experts say the upcoming earnings season will be overshadowed by the broader economic climate, with interest rates and inflation data more closely watched than individual company reports.
Companies have been signalling a lacklustre earnings season for a wide variety of reasons, many of them global.
With economic data showing a slowdown as 2022 came to a close and economists divided over whether 2023 will bring a recession or a soft landing, corporate earnings will provide insight into how businesses weathered the final quarter of the year — and signal what’s in store for the year ahead.
“There’s no shortage of headwinds impacting earnings, such as reduced demand, inflated inventories, higher costs,” said Lesley Marks, chief investment officer of equity at Mackenzie Investments.
Lululemon raised its revenue guidance but lowered its forecast on margins, saying the company is navigating a “a dynamic macro-backdrop.” Canada Goose previously revised its full-year outlook for 2022 due to a decline in sales in China.
Some companies say they will see earnings in the final quarter of 2022 affected by weather, like Cenovus Energy Inc., which expects its refinery throughput to be weaker due to extreme winter weather, operational issues and third-party pipeline outages.
However, some think the market may be in for a pleasant surprise from the bigger earnings picture.
“There’s generally a pessimistic view as we head into earnings season, in good times and bad,” said Michael Currie, senior investment adviser at TD Wealth, but he thinks that pessimism is often overshot.
Right now, the bigger economic picture of inflation and interest rates is much more important to investors than individual earnings reports, said Currie.
In 2022, investors were always waiting for the other shoe to drop, said Greg Taylor, chief investment officer at Purpose Investments, entering each earnings season anticipating a slump and then rallying with relief when results were better than expected.
This earnings season feels similar, said Taylor, but it remains to be seen whether results will be something to rally over.
“It does feel like companies have done a decent job controlling the expenses,” he said.
However, markets started 2023 with an upward bounce so if there’s a relief rally, it may be subdued since it won’t be coming off of the lows seen entering other earnings seasons, he said.
