The staggered effect of the industrial slowdown in the last fiscal year seems to be showing, but there is also a sign of a corporate rebound.
The net profit of the top 95 companies covered by Morgan Stanley is seen falling by 2 per cent in the quarter ended June 30 against a 25 per cent rise in the quarter ended March 31, according to an earnings outlook released by the investment research firm.
However, the report said despite the fall in earnings this quarter and the next, after the March quarter marked a bottom for earnings growth, a sequential improvement in earnings performance is in the offing. It added that broad market earnings could also rebound from a 12 per cent year-on-year (YoY) fall in the March 31, 2009 quarter.
The outlook says the earnings of companies comprising the BSE Sensex are expected to fall 10 per cent from a year earlier, compared with a drop of 8 per cent and 14 per cent the quarters ended March 31, 2009 and December 31, 2008, respectively.
“By our analyst estimates, revenues for the MS coverage stocks will fall of 7 per cent year-on-year. Revenues could therefore be down for a second consecutive quarter. Except energy, our analysts’ expect revenues to grow 9 per cent YoY,” the report said.
It said the strongest earnings growth was likely in the energy and consumer staples sector while materials and consumer discretionary (a reference to consumer goods not considered as basic needs) appeared distinctly weak for the third consecutive quarter.
If the energy sector is included, the sample’s aggregate EBITDA (earnings before interest, tax depreciation and amortisation) margins are likely to rise by 157 basis points —1.57 percentage points — year-on-year.
“Ex-energy EBITDA margins are forecast to fall 217 basis points” the report said.