CORPORATE earnings are expected to improve by 14 percent to 16 percent for the whole of 2015 despite a “lower-than-expected” turnout in the first quarter of the year.
A research note by RCBC Securities Inc. foresees corporate earnings improving as much as 16 percent for the whole of 2015, better than the average 8 percent recorded in 2014.
Luis Limlingan, managing director of Regina Capital Development Corp., mirrored the earnings forecast. Even if Regina Capital revised its full year expectations due to disappointing results in the first three months of the year, the brokerage is betting aggregate corporate earnings will manage to grow up to 15 percent this year.
“Because of the disappointing first quarter, we see that the aggregate earnings growth will be at 14 percent to 15 percent from the 16 percent initially forecasted,” Limlingan said, noting that aggregate earnings were at 13 percent in January to March.
“But we think this will pick up in the last period of the year,” he added.
RCBC is banking on the companies with a disappointing turn out in the first quarter will be the ones lifting the aggregate earnings for the rest of the year.
“We still consider the results to be generally in line for two reasons: the greater number of companies which met or exceeded our expectations, versus that which did not, and the high likelihood that companies such as Petron, Bloomberry, and Alliance Global will be able to post more favorable earnings in the remaining three quarters of the year,” it said.
In the first quarter, Bloomberry surprised the market with a net income turnaround of P1.46 billion from a P533.05 million net loss in the same period last year.
Alliance Global, however, posted lower profits of P5.57 billion from P6.25 billion.
Petron also recorded a hefty decline in first quarter net income to P257 million from P2.22 billion due to plunging oil prices in global markets.
Power and consumer companies have a greater chance of churning out better earnings for 2015, given the strong demand in energy while the low inflation regime boosts the people’s purchasing power, Limlingan said.
“Against the backdrop of a market that is generally overvalued but that still has a number of stocks that lag behind valuation wise, the task of stock selection has therefore become even more challenging and crucial,” RCBC said.
According to RCBC, the top companies that did not met expectations were Philippine National Bank, Union Bank of the Philippines and East West Banking Corp., 8990 Holdings Inc., Aboitiz Equity Ventures Inc. and Alliance Global Group Inc., Emperador Inc., First Gen Corp., Marcventures and Philex Mining Corp., as well as Bloomberry Resorts Corp. and Travellers International Hotel Group Inc.
During the first quarter, RCBC noted the sectors that surprised the market in general are banks and property companies, while those in line with expectations are consumer, telecommunications, power and mining companies. Those that trudged below expectations were holding firms and gaming companies.
Next year, RCBC projects a 12-percent aggregate earnings growth, while Regina Capital is betting on 16 percent.