U.S. Corporate Earnings Must RAMP

With the S&P 500 at 21.5x 2024 consensus earnings and imminent rate cuts off the table, U.S. corporate earnings must RAMP: “Reflation,” “AI," “Margins,” and “Profit Ramping”
are key factors to watch in company releases.

Given a 21x forward market P/E and imminent rate reductions likely off the table, investors are betting earnings growth will accelerate from an anemic 0.9% growth rate in 2023. If this does not occur, we believe the Q1 cyclical sector return leaders Energy, Financials, and Materials (up 14.43%, 12.98%, and 7.79%, respectively) are the most at risk. Currently, consensus 2024 EPS growth estimates for the sectors are -2.6%, 11.4%, and 1.9%, respectively. Analysts reduced consensus estimates for all three sectors during the quarter.

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Lynch: Looking at Earnings Season Through RAMP Framework

Eric Lynch, managing director at Scharf Investments, appeared on Reuters TV last week and discussed what to look for in Q1 earnings season. We see downside risk to the 11% EPS growth estimates for all of 2024, and Q1 will be an early indicator if we can ramp from current 3% trend profit growth.

Discussions in the links below include forward-looking assumptions and opinions by Scharf Investments and there is no guarantee that the recommendations will be profitable. Investments include risk of loss. The securities identified and described do not represent all of the securities purchased, sold or recommended for client accounts. The viewer should not assume that an investment in the securities identified was or will be profitable.

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Krawez Highlights Opportunities in Korea and Japan

Brian Krawez, president and lead portfolio manager of Scharf Investments, says that while he believes Korean stocks are “very, very cheap,” the ‘Korea discount’ could start to close with ongoing government reforms. Brian recently shared his thoughts on the opportunities we see in both Korea and Japan with Tanvir Gil on CNBC Asia’s “Street Signs.” While we see similarities in both markets in terms of growth—look at Toyota vs. Hyundai, for example—the valuations among Korean companies are very compelling at this time.

Discussions in the links below include forward-looking assumptions and opinions by Scharf Investments and there is no guarantee that the recommendations will be profitable. Investments include risk of loss. The securities identified and described do not represent all of the securities purchased, sold or recommended for client accounts. The viewer should not assume that an investment in the securities identified was or will be profitable.

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If you have any questions regarding the updates shared above, please give us a call. Thad and I are committed to providing you with the data and resources you need to build client portfolios and grow your practice. Please reach out if you need anything.

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