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09.01.2023
Earnings Season
Q4 earnings season starts this week and analysts have been cutting estimates. FactSet show that over the last 3 months, consensus expectations for Q4 have fallen 6.5%.

It's normal for analysts to cut numbers ahead of time - it lowers the bar, making beats easier to achieve - but the reductions over Q3 and Q4 2022 were larger than normal.

Interestingly, recession fears have been increasingly priced into earnings estimates at a time when Now-Casting shows US GDP growth tracking around 2.0% annualised.

From a macro perspective, one of history's most anticipated recessions still isn't apparent in the hard data.

Marrying top down and bottom up analysis is never easy. Fortunately, Qi can at least let investors know when each skill set is required.
Earnings
This list isn't exhaustive but includes most of the blue chip names reporting earnings this week. And of that list, the majority sit to the left of our 65% threshold for a macro regime.

For these stocks, it's business as usual for a stock picker. Company fundamentals matter more than the macro environment.

Five names though display high sensitivity to macro conditions. There are no big valuation gaps but a couple of observations:
  • Boston Scientific is only 2.1% cheap to model. But that's the first time it has screened as cheap to macro since late June.
  • All three financials have seen increases in macro-warranted model value early in the new year. Since Dec 30th Blackrock's target price is up 4.3%, Jefferies model value has risen 4.6% and JP Morgan is up 5.1%. Macro conditions are improving.
  • In contrast, model value for Albertsons is flat-lining. Unlike financials, aggregate macro conditions for this consumer staple stocks is treading water, awaiting the next clue on direction.
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