Revival In Corporate Earnings: Fact Or Fiction?

The first quarter earning season has been better than expected for Nifty50 companies, with more hits than misses. Out of 51 companies on the index, net profit of 32 companies met or beat street expectations, while 18 companies missed analyst estimates.

While the sales growth has been muted at 1 percent as compared to the corresponding June quarter last year, the operating profit or EBITDA has grown by a stronger 7.7 percent in the same period, aided by lower input costs.

And while more companies’ net profit has beat estimates than not, on average net profit has fallen by 4.5 percent over the same quarter last year led by weakness in telecom, Tata Motors, banks and Tata Steel.

Amongst the sectors, cement brought some cheer even as the IT pack underperformed.

Company-wise, while Sun Pharma’s net profit grew the most – over three-fold – aided by a one-off opportunity in the U.S., GAIL was the biggest positive surprise in terms of its PAT growth, which came in 68 percent above street estimates due to a stake sale in Mahanagar Gas.

On the other hand, Tata Steel was the biggest disappointment with a net loss of Rs 3,831 crore.

However, the Nifty has rallied about 13 percent since April 1, far ahead of the earnings growth, raising doubts on whether the corporate earnings growth have actually bottomed out or not.