The Baseline    
25 May 2022
Big Misses: Many companies miss analyst profit estimates in Q4

Stock markets are volatile amid signs that all is not well in the corporate world. Q4FY22 results confirmed that many businesses are struggling with rising inflation, supply pressures and worried consumers. Trendlyne’s Forecaster estimates show quite a few companies from the Nifty 500 missing Q4 net profit estimates by a large margin.

Over 150 Nifty companies missed their adjusted net profit estimates. Trendlyne’s Forecaster shows that many companies in the pharmaceutical sector saw their actual adjusted net profit miss consensus estimates by more than 100%. Among these, Lupin’s Q4FY22 net profit missed Trendlyne’s Forecaster estimates by the widest gap of 310.7%.

Lupin’s miss was because of a deferred tax expense of Rs 341.9 crore. GSK Pharma is another pharma company that missed its profit estimates due to a one-time tax adjustment of Rs 202 crore.

Most pharma companies struggled because of muted growth in US markets and an increase in costs because of freight charges, marketing expenses, and input costs. Cost pressures also led to companies in sectors like automobile, retailing, cement, banks, and consumer services, to miss Trendlyne’s Forecaster profit estimates. The companies that missed Trendlyne Forecaster’s estimates by more than 100% include Tata Motors (156.9%), Trent (151.7%), Nuvoco Vistas Corporation (135.6%), and GMR Infrastructure (123.3%).

With inflation hitting nearly 8% in April 2022, the Reserve Bank of India is hiking its rates to reduce excess liquidity in the market. This will affect the earnings of corporates in H1FY23 as demand is likely to take a hit. 

On the bright side, a report by ICICI Securities suggests that the earnings base will continue to expand over FY22-24 with more beats than misses. The brokerage expects demand and earnings to show significant improvement in sectors like real estate, banks, energy, and consumer services. As we head into the next quarter, let’s hope that the analysts' optimism turns out true in Q1FY23.

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