Corporate earnings seen to grow at slower pace

MANILA, Philippines - Corporate earnings will continue picking up this year albeit at a slower pace, weighed down by the a sence of robust trading gains of banks.

Select sectors like power and energy, utilities and consumer firms will provide the boost in profits this year, analysts said.

“The main concern for equities is the slower earnings growth in 2014 and shift of funds towards developed markets,” said Gregg Adrian R. Ilag, analyst at AB Capital Securities Inc.

“We see market earnings per share (EPS) growing by seven percent in 2014, which is slower than the nine percent growth in 2013,” Ilag said.

In particular, banking stocks that account for 23.85 percent of the Philippine Stock Exchange (PSE) index’s EPS, will experience lower profits with the decrease in trading gains.

“Corporate earnings, which have the highest correlation with stock prices over the long-term, is still expected to continue its pace of between 20-25 percent,” said Justino Calaycay Jr., analyst at Accord Capital Equities Corp.

For Augusto Cosio Jr., president of First Metro Asset Management Inc., EPS might pick up 9-10 percent this year, with banks’ earnings seen to improve at a slower pace of 5-10 percent.

Combined earnings of all locally listed companies continued picking up in the first half last year, driven by better performance of financial, property and holding firms.

Aggregate earnings of listed firms rose 4.4 percent for the first six months of 2013 to P275.5 billion from the previous year’s P263.79 billion.

Combined revenues climbed nine percent to P2.46 trillion from a year ago, PSE data showed.

Calaycay said some weakness might show up at the beginning of the year as investors wait for fourth quarter gross domestic product (GDP) numbers.

The Philippines’ gross domestic product, supported by strong consumer and government spending, picked up 7.4 percent in January to September, well above the government’s growth target of six to seven percent for 2013.

However, the devastation caused by Super Typhoon Yolanda caused anxieties over the full-year economic growth.

“Overall, evident weaknesses represent opportunities to tweak portfolios and move to sectors expected to lead the year,” Calaycay said.

Specifically, construction and allied services, power and energy, utilities, and food and beverage firms will drive the growth in earnings this year, Calaycay said.