2024 earnings recovery is already priced in – RBC

The third-quarter reporting season has been solid for the , but RBC Capital Markets strategists see a mixed earnings setup for 2024.

“It’s hard to argue that the recovery isn’t already baked in” for 2024, the analysts wrote in a report.

The analysts point out that bottom-up consensus estimates often start too high in most years and tend to be adjusted down by the middle of the year. RBC highlights the need to adjust 2024 forecasts.

During earnings calls, management has expressed complexity, caution, challenge, and uncertainty in the macro backdrop. The consumer is described as resilient, but there’s evidence of stress at the lower end.

Non-U.S. markets, especially China, have a more negative tone, and elevated costs and how companies address them remain focal points.

The analysts told RBC’s clients earlier this week that equities should continue to move higher. They were citing an indicator of net bullishness using a four-week average.

“We still feel a little better about the near-term direction of US equities than we did in late August/September,” they said in the report on Monday.