Most Companies Beat Or Met Earnings Forecast This Season

This earnings season has been the best for India’s top companies in at least five quarters.

Of the Nifty 50 companies, 40 either beat the consensus estimates of analysts tracked by Bloomberg or met forecasts in the quarter ended September. That’s the highest since quarter ended June last year. Automakers were the best performers this time, followed by consumer, banking and information technology sectors.

The Big Picture

• Beat estimates: 16
• In line: 24
• Miss estimates: 10

Key Takeaways

• Bajaj Auto Ltd. beat street estimates and most four-wheeler companies reported strong financials.
• Among cement makers, Ultratech Ltd. clocked better numbers than Ambuja Cement Ltd.. ACC Ltd. was dropped from Nifty 50.
• Larsen & Toubro Ltd., the only infrastructure company in the index, reported strong earnings, but lowered order inflow guidance.
• All three consumer companies, Asian Paints Ltd., ITC Ltd. and Hindustan Unilever Ltd., reported in-line numbers.
• After two strong quarters, Reliance Industries Ltd. reported muted growth – the only silver lining being Reliance Jio turning in an operating profit.
• Most oil marketing companies failed to meet street estimates, with GAIL being the only outperformer.
• Banking and finance, which has the highest weight in the index, failed to impress Street. Most companies met or missed expectations, with State Bank of India being the only lender to post lower slippages and strong financials.
• Tech Mahindra Ltd. was the outperformer in the information technology category. Most firms forecast a weaker full-year growth.
• Pharmaceutical companies brought some cheer as Dr. Reddy Laboratories Ltd., Cipla Ltd. and Aurobindo Pharmaceuticals Ltd. beat expectations.

Operating income and profit rose in double digits, aided by margin expansion, except for building materials, cement and industrials segments, Suhas Harinarayanan, head of institutional equity research at JM Financial Institutional Securities, told BloombergQuint.

Most Companies Met Estimates

The number of NSE Nifty 50 companies missing analysts’ estimates fell to 10 from 19 in the previous quarter, with most companies meeting consensus estimates.

The profit is expected to rise 35 percent year-on-year in the second half of the year to March 2018 compared to a 4 percent contraction in the first half, according to Harinarayanan. He sees good growth for private banks and non-banking finance companies, which may face margin pressures. He expects a weak earnings growth for the telecom sector.