This earnings season, what CEOs say matters more than what they’ve done

{"text":[[{"start":5.04,"text":"There is always room for surprises when companies start baring their quarterly finances. The current crop of US earnings reports is likely to show the highest growth rate in five years. Yet investors are already preparing for next year, when the pace is expected to slow significantly. Bosses used to upbeat growth talk will have to choose their words carefully."}],[{"start":25.8,"text":"Earnings for what most companies call their third quarter are expected to have grown by 30 per cent year-on-year, according to FactSet. In 2027 though, analysts predict 16 per cent. The growing unease around AI-related investments, reflected in the sell-off of data centre debt, means anxiety about disappointing results is undoubtedly rising. Unless the numbers this time are exceptional enough to rip up those forecasts, it will be managers’ words, as much as any deeds, that will sway share prices in the weeks ahead."}],[{"start":null,"text":"

"}],[{"start":56.32,"text":"The generally positive economic picture should be some comfort. Capital expenditure levels, even outside technology companies, have been growing by more than a tenth this year, implying broad confidence in the outlook. Profit margins though, are likely to get squeezed if inflation persists. In the previous quarter, mentions of rising input costs reached their highest in four years, according to Bank of America. At least wage growth — usually a far bigger direct contributor to costs than energy — so far appears moderate."}],[{"start":86.84,"text":"Bosses are likely to face even more questions about AI, particularly on their own investments. Companies could also explain better what they’re getting from deploying it: about half of S&P 500 members after the second quarter talked about using AI to enhance productivity and efficiency, but only 2 per cent quantified the benefits, according to Goldman Sachs analysts."}],[{"start":107.68,"text":"Those who can begin to shape their 2027 narrative now will give themselves a head start on what is likely to be a bumpy year. In two-thirds of cases when earnings growth slows, markets do gain, according to Citigroup analysts, albeit by a miserly average 5 per cent. Exceptions, though, include 2000 as the dotcom bubble deflated and 2022, when inflation from an energy shock hurt high valuations. It’s always best to have conversations about difficult topics early and voluntarily, rather than later and under duress."}],[{"start":144.4,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1792219084_4623.mp3"}