Earnings season kicks off amid gloomy outlook

The fourth-quarter reporting season kicked off Tuesday amid low expectations as Korea’s listed firms continue to suffer from sluggish exports and a global slowdown.

This week, some 32 companies listed on the main KOSPI bourse are planning to report their results for the October-December period in 2015.

Analysts have been constantly revising down their outlook amid a series of weak quarterly performance reports by major Korean companies despite their efforts to restructure operations throughout last year. 

Some 209 major listed companies, for which more than three brokerages houses have offered earnings estimates, are projected to register a combined operating profit of 27.33 trillion won ($22.7 billion) in Q4, according to the median estimate compiled by market tracker WISEfn.

The number is down 6.56 percent from 29.25 trillion won, the initial estimate at the beginning of this year.

However, industry watchers expect the final results to lag far behind the revised outlook.

“Normally, Q4 results are 20 percent lower than the preceding quarter, but some forecasts for 2015 still remain higher than Q3 which means there is still room for downward revision,” Yeom Dong-chan, LIG Investment & Securities analyst said.

Analysts said the gloomy Q4 estimates came as export firms faced a decline in shipments on slumping global demand, weaker-than-expected support from a weaker won as well as usual seasonal reasons.

“Given that financial events such as dividend payment take place during the fourth quarter, it is hard to predict firms’ Q4 performance. And that’s the reason why unexpected earning shocks frequently occur during the period,” Kim Gwang-hyun, an analyst at Yuanta Securities Korea said.

The KOSPI index dropped 1.15 percent on Tuesday as investors were disheartened by lackluster earnings of the blue chip firms like SK hynix and Hyundai Motor.

On Tuesday, the world’s second-largest chipmaker SK hynix said its quarterly net profit fell 46.3 percent on slowing semiconductor sales.

The country’s top carmaker Hyundai Motor also posted a 7.7 percent drop in net profits, blaming the won’s ascent against other currencies and heated competition in global markets.

Some analysts ruled out any further negative impact of the upcoming gloomy results, saying that earlier turbulent days on the stock market already reflected concerns over earnings.

“The uncertainty and concerns over the Q4 results are a well-known issue. It might weigh on early week trading but investors will feel relieved later this week,” Lee Kyung-min, an analyst at Daishin Securities said.

By Park Han-na (hnpark@heraldcorp.com)