Ahead of 2Q Earnings Season... Continued Downgrades in Profit Estimates for Listed Companies

[Image source=Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] Amid growing concerns about a global economic recession, there are forecasts that domestic companies' earnings this year will be weaker than expected. Consequently, worries are increasing that the already declining stock prices may fall further.

According to FnGuide on the 3rd, the consolidated net profit forecast for this year of 239 listed companies, each with earnings estimates from three or more consensus institutions, is 182.1428 trillion KRW, a 0.2% decrease compared to last year.

The second-quarter net profit of 177 listed companies with earnings estimates for Q2 is predicted to be 35.9321 trillion KRW, down 0.4% from the same period last year. Their second-quarter operating profit estimate is 48.8565 trillion KRW, up 2.5%, but 59 companies, accounting for 33.3% of the total, are expected to see a decrease compared to the same period last year.

Companies expected to see a decline in second-quarter operating profit include LG Electronics, Hyundai Mobis, POSCO Holdings, Samsung Biologics, NHN, DoubleU Games, Amorepacific, Hotel Shilla, Hanwha, E-Mart, LG Chem, LG Energy Solution, and Lotte Chemical.

Furthermore, ahead of the Q2 earnings season, which will officially begin with Samsung Electronics on the 7th, downward revisions of profit estimates from major companies are dampening investor sentiment. According to NH Investment & Securities, over the past two weeks, the operating profit forecasts for Q2 and Q3 of KOSPI-listed companies have been revised downward by 1.0% and 2.8%, respectively. The downward revision for Q4 operating profit is even larger at 3.6%.

In particular, due to concerns over falling DRAM prices, the downward revision for Samsung Electronics' operating profit forecast has increased progressively: 3.1% for Q2, 7.5% for Q3, and 8.9% for Q4. Since these semiconductor companies hold a significant share of the overall stock market, a decline in their earnings inevitably leads to further decreases in the earnings of KOSPI companies. Shinhan Investment Corp. also lowered Samsung Electronics' sales and operating profit forecasts for this year by 1.5% and 2.7%, respectively, to 313.7 trillion KRW and 58.5 trillion KRW. KB Securities revised SK Hynix's sales and operating profit forecasts for this year from 59.689 trillion KRW and 15.282 trillion KRW to 59.403 trillion KRW and 14.398 trillion KRW, respectively.