Downward earnings revisions continue

The chart shows the changes in the estimates of earnings growth in Sensex firms, made by Kotak Institutional Equities Research. Note that the estimates for FY13 are currently at their lowest during the year. That indicates analysts have become more pessimistic about corporate earnings for the current fiscal. True, the estimates of earnings growth for FY14 show a slight upturn but then, these longer-term projections are often substantially revised. For instance, in November 2011, Kotak’s estimate for FY13 earnings growth for the Sensex companies was as high as 17.6% year-on-year (y-o-y), a figure that has now been revised down to 5.8%. The recent September-quarter corporate results have led to a downward revision of earnings. Says the recent Kotak report: “We estimate FY2013 BSE 30 EPS at Rs.1,192 and FY2014 EPS at Rs.1,335. That is lower versus Rs.1,202 for FY2013 and Rs.1,357 for FY2014 at the start of 2QFY13 results season.”