HSBC provided insight into the upcoming fourth-quarter earnings season, noting that reduced consensus forecasts for fourth-quarter earnings per share (EPS) growth set a low bar, which could result in many companies beating expectations.
This scenario can lead to a temporary increase in stock prices for those that meet or exceed forecasts.
However, HSBC stressed that sustained share price momentum will depend on the companies’ outlook for 2025.
The report showed that the fourth quarter EPS growth forecast is now 3.8%, a significant decrease from the 9% projection after the third quarter reporting season. Most sectors have seen EPS estimates decline, and cyclical trends remain a driver of growth.
On the other hand, estimates of revenue growth for the fourth quarter saw a slight increase to +0.9% from -0.3% two months earlier.
Looking ahead, HSBC noted an improvement in its 2025 UK EPS outlook, attributing this positive shift to the strength of the US dollar.
The research firm predicts the company’s guidance will reflect this optimism, albeit cautiously due to uncertainty surrounding US tariff policies and weak consumer confidence, particularly in the UK. Nevertheless, initial reports from the luxury sector indicate a promising start.
Despite the positive signs for 2025, the consensus estimate of EPS growth for Europe for calendar year 2024 has been revised down to just 0.2%, a sharp contrast to the 5.6% expected at the start of the year.
The consumer discretionary and energy sectors were cited as the biggest contributors to this downward trend.
HSBC concluded that the fourth-quarter reporting season could confirm whether European and UK equity markets have indeed passed the peak of uncertainty.
