Second quarter global earnings season wraps - Tue 1 Sep

0:00So second quarter global earnings season all wrapped up. I'm joined by Roger Garrett from Craig's investment partners Roger. Can you summarise it? How did it all pan out? I don't think we can overstate how strong the second quarter earnings season was. I mean we globally we had earnings growth around about 37%. And you know that's the sort of number you'd expect coming out of a recession and we're not operating off a depressed base. We're at the extended stage of an economic cycle. So that makes the number pretty impressive. And it's not just one region everywhere is performing well. So Japan and emerging markets were the size of the quarter. They grew around about 50% earnings. US obviously the biggest market, the most important market grew earnings around about sort of 34% and even Europe which has been sort of the laggard has joined the party. And we saw sort of 22% earnings growth from that region. So you know pretty impressive sort of quarter. They don't

1:00all have equal exposure those different sectors to the tech trade. So is it just the tech trade that's driving this is just the great AI story? No that's it you know that's a really important point. I mean the tech trade is a dominant driver both of economic growth and also earnings growth but it's not the only engine now and we've seen a broadening in growth to other sectors. You know if you look at the US market you go back a year the tech contributor probably about 90% of the earnings growth in the last quarter it was around about 50%. So we're seeing industries like industrials, financials and even to a certain extent consumer you know starting to contribute. And that's important because we don't want you know the the market to rely on the performance of one sector. So that said you read stories and headlines like you know the US trucking sector is taking off but it's because they're moving heavy earthenware equipment and components for data centers around the place. So it's all kind of goes back to tech doesn't it? It does and there's a lot of industries that are benefiting from this whole sort of AI investment cycle and it's it's not just

2:06tracking it it's going to be water cooling it's going to be components that come into it and all the other sort of picks and shovels types of businesses that benefit. So we're waiting to see whether or not there's some employment data coming out of the US to suggest things that may be softening there but the reporting from a lot of the consumer facing companies particularly sort of the lowest sort of value end they're all talking a pretty good game maybe with the exhibition of war man aren't they? Are they just still spending pretty well over the year in the US? Yeah I'll look I think I think you know we're we're seeing it from the companies you know these are a mastercard probably have the the biggest exposure to that they're exposed to all types of spending and you know that they're actually both of them are said in the quarter that they expect that they think the consumer is actually accelerated in terms of their their you know their activity in the market. Gosh makes us all seem a little bit quiet here then doesn't it? If you look at Europe I mean that's very much a market that's sensitive to the energy prices and to the fluctuations that we've seen yet it's still held up quite well. It has and I mean

3:10the European market is geared to the industrial cycle and the industrial cycle has started to pick up and so and there's a lot of operational leverage that that comes in there but also has exposure to to the energy sector and material sector and you know that's contributing to the earnings growth in the market as well. I think I had some weird about Mercedes offering a big buyback so shortly on its price as well so no doubt they sort of feel that they're a little bit undervalued there. Look I suppose it feels like tremendous momentum but some talk that maybe the momentum trade is drifting a little bit off do you think it might be time for the value investors to get back in the game? Yeah I'll look at I mean I maybe value maybe maybe growth but you just say if the momentum trade is starting to die then that would probably a good environment for stock pickers and so those people had that you know focus on key fundamentals you would hope it would start to sort of you know then they keep. Roger Garrett thanks very much for bringing us that wrap on the quarter there that's Roger Garrett from Craigs.

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