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Third-quarter earnings season off to a "mixed start", Barclays says

Published 10/18/2024, 08:18 PM
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Investing.com -- The third-quarter earnings season is off to a mixed start, with better-than-anticipated results being rewarded in the US and misses being "severely punished in Europe", according to analysts at Barclays.

In a note to clients on Friday, the analysts wrote that negative pre-announcements and economic surprises had already been pointing to a challenging reporting period for major corporations.

"While it is too early to draw conclusions, results have so far confirmed our expectations," they said.

This has mainly played out in Europe, the analysts noted, adding that earnings beats in the region have been lower than usual and share price reactions to results have been largely "skewed to the downside." They called the quarterly earnings season so far in Europe "the most negative on our record since 2020".

By contrast, US numbers have looked relatively "good so far", the Barclays analysts argued. Banks in particular have mostly surprised to the upside, fueling positive investor sentiment, they said.

Several large Wall Street lenders, including JPMorgan Chase (NYSE:JPM), Goldman Sachs (NYSE:GS), and Bank of America (NYSE:BAC), have unveiled higher-than-projected quarterly incomes that have been boosted by solid investment banking fees.

However, the Barclays analysts flagged the bulk of the reporting period lies ahead and "more dispersion should be expected in the coming weeks, and likely more downgrades, too, given the still high consensus estimates for 2025."

"Along with an uncertain US elections looming, this could cause markets to tread water near term and investors to stay on the side lines until uncertainty goes away," they said.

Even still, the analysts said the mixed earnings should not be a big surprise to markets, "nor alter the overall direction of travel for equities."

"This reporting season could even turn into a clearing event, as incoming data keep the US soft landing narrative well on track into 2025," they added.

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