Tracking change in consensus earnings estimate reveals 7% downgrade in FY19 estimates, over the course of the past one year, for 37 of the KSE100 Index companies for which required data is available.

As expected, cyclicals have faced brunt of the downgrades with aggregate earnings estimate for consumer discretionary down by 35%, materials down by 15%, and financials down by 10%. However, non-cyclical aggregate earnings estimate are up with energy up by 12% and utilities up by 3%. Despite the downgrades aggregate FY19 earnings estimates are still depicting YoY growth. Implied growth in financial earnings is 37%, 33% for energy sector, and 56% for utilities.

Given the sharp slowdown in economic growth for FY19 the growth estimates appear lofty and one should expect further cuts in FY19 estimates, especially for cyclical sectors such as financials where YoY growth still appears aggressive.

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