The positive trend, which started in the last reporting quarter, should also be confirmed in the upcoming reporting season. However, it should be highlighted that the expected figures are below those from the previous quarter although we expect positive sales and earnings growth. In Q1 2017 US sales grew by 8% year on year (y/y), in contrast to nearly 5% in Q2. The significant US earnings growth of more than 14% in Q1 cannot be repeated either, since only 4.5% earnings growth is expected. Earnings revisions thus remain in positive territory but on a lower level than in the previous quarter. Cyclical sectors show a higher level of positive revisions than defensives.
At Julius Baer, we see the same trend in Europe, but generally on a higher level than in the US. The Q1 2017 reporting season for the Stoxx 600 index ended with earnings growth of almost 25% y/y. For the upcoming reporting period a level of almost 13% is still expected. In terms of sales growth the figures are 11% in Q1 vs. expected 7.4% in Q2.
Generally speaking, it confirms our view that eurozone equities remain more attractive than those from the US. For the full year 2017, our models confirm earnings growth of 5%-6% in the US and circa 8% in the eurozone. Both growth expectations remain clearly below consensus growth expectations of 10%.