The Biggest Earnings Downgrades And Upgrades After Third Quarter

Earnings estimates of more than half of widely tracked Indian companies have been lowered after the third-quarter results as the recovery has fallen short of analysts’ expectations.

Earnings per share forecast was cut for 151 of the 253 companies tracked by at least 10 analysts, according to data compiled by Bloomberg. The deepest cuts were witnessed by sectors like automobiles, cement and commodities on weak outlook. Construction, pharmaceuticals, consumer and retail saw the biggest upgrades.

The Nifty 50 earnings per share missed the consensus estimate by 19 percent in the quarter ended December, according to BloombergQuint’s calculations. That’s when 41 of the 50 companies either met or beat estimates—the highest in at least six quarters. But it was largely because of Tata Motors Ltd.’s record quarterly loss, also the biggest by any Indian company.

The stocks with the biggest cut in EPS estimate:

Here are the reasons brokerages cited for cutting earnings estimates.

Tata Motors: The record loss due to a non-cash write off for its luxury brand Jaguar Land Rover because of a slowing business in key China market and uncertainties over Brexit led.

Cement Companies - Double whammy of lower cement prices and higher energy and freight costs resulted into poor financial performance.

Aviation Companies: Despite managing to report profits, higher costs and lower passenger growth weighed on the financials.

Healthcare Global: Higher loses due to increased interest cost and foreign exchange losses weighed on financials.

Jindal Steel & Power: Lower steel spreads and reduced utilisation, higher coal costs and non-availability of medium to long-term power purchase agreements in power business hurt its earnings.

Sadbhav Engineering: Slower execution due to delay in projects resulted in a decline in its top line.

Karur Vysya: Increased slippages in corporate and higher-than-anticipated credit cost led analysts to cut earnings estimates.

The stocks with the biggest increase in EPS forecast:

Here are the reasons brokerages cited for increasing the earnings estimates.

Ashoka Buildcon: A strong order book and robust execution in both the road and power segments aided financials.

DCB Bank: Uptick in net interest income, higher other income due to treasury gains and controlled operating expenses led to the EPS upgrade.

KNR Construction: Higher share of revenue coming from high-margin irrigation projects helped the company report better-than-expected December quarter numbers.

Tata Communications: Strong performance by data segment and one-offs which aided the company’s operational performance.

Biocon: Robust performance across verticals and a sharp rise in margin aided financials.

Strides Pharma: Stake sale to cut debt, rapid recovery in its core markets and better profitability in other regulated market and the U.S.

IPCA Lab: Improved prospects for branded business, revival in the U.K. business, lower remediation costs and improved profitability aided financials.

Dish TV: Higher Ebitda due to cost controls and because of its merger with Videocon D2H.

Alembic Pharma: Strong third-quarter earnings due to higher U.S. sales, lower costs and lower tax rate.

Manappuram Finance: Better-than-expected net interest margins, steady asset quality and improvement in the non-gold businesses.

(The reasons for upgrades and downgrades have been compiled from reports by JPMorgan, CLSA, HDFC Securities, Elara Securities, Emkay, ICICI Direct, Antique and Edelweiss, among others)