Lower Expectations for Q4 Earnings... Focus on Companies with Surprise Results

[Asia Economy Reporter Song Hwajeong] As the earnings season for the fourth quarter of last year has begun, KOSPI operating profits are expected to record the lowest level in five years. Amid generally poor performance, market attention is expected to focus on companies that have posted earnings surprises.

According to Korea Investment & Securities on the 11th, KOSPI operating profits for the fourth quarter of last year are expected to be 29.7 trillion won. Daejun Kim, a researcher at Korea Investment & Securities, explained, "This is similar to the 2014 estimate, which was the lowest figure in the past five years."

There is an opinion that disappointment may grow as corporate earnings are disclosed. Typically, during the fourth-quarter earnings season, the gap between estimates and final figures widens significantly. Researcher Kim said, "This is due to the practice of companies clearing one-time expenses in the last quarter," adding, "For example, from 2014 to 2018, the gap between operating profit estimates and final figures was around 20%."

Considering this gap, it is forecasted that the confirmed operating profit for KOSPI could fall to the low 20 trillion won range. Researcher Kim stated, "If the average gap rate of the past five years is applied, the figure is adjusted downward to 23.3 trillion won," and explained, "The adjustment to this figure does not seem unusual because recent corporate profit estimates are changing rapidly."

Accordingly, the market is expected to focus more on surprises that can change profit momentum. Especially during the fourth-quarter earnings season, it is harder to see surprises than usual, so if a company records a surprise performance, the positive effect is expected to be even greater. Researcher Kim analyzed, "Looking at Samsung Electronics and LG Electronics alone, the difference is clear," adding, "Samsung Electronics, which recorded a surprise, continues its upward trend due to foreign capital inflow, while LG Electronics, which recorded a shock, has limited capital inflow." He added, "The stock price performance is the same," and said, "In the future, it will be necessary to focus more on companies with earnings surprises that exceed expectations."

This content was produced with the assistance of AI translation services.