With the peak for quarterly results disclosure having finished yesterday, we will start our cycle of results reviews by analyzing results by sector.
The Japan Analytics Results Score is a measure of earnings results and earnings momentum which covers the last eight quarters for revenue and operating income.
The score has a maximum of 30 and minimum of -30. The Results Scores are then aggregated for each Peer Group and Sector weighted by market capitalization.
The weighted Average Results Score for currently listed companies has fluctuated between -12 and 10 over the last fifteen years. The most recent low was-3.2 in December 2016. Since then the average score has risen by over 10 points and is now at 7.15 a level that has only been bettered for nine months during 2013/14. The current earnings cycle is the now the second strongest in over twenty years. The chart also shows the breakdown by sectors which are color coded according the the legend on the right.
Since 2003 the top five sectors by cumulative score are the Internet, Information Technology, Commercial Services, Consumer Services and Retail Sectors. The bottom five are Banks, Energy, Metals, Tech Hardware and Media. As would be expected, the most volatile sectors have been Autos, Energy, Metals, Tech Hardware and Machinery with the least volatile being Restaurants, Retail, Food, Internet and Real Estate.
As has not gone unnoticed by the market, October and November 2017 are the first two months since 2013 when all sectors had aggregate positive Results Scores. In the last fifteen years there have only been 13 such months, six months in 2006 and five in 2013. Given the three month results cycle, we can expect the current trend in Results Scores to continue until February after which a downturn is likely.
Zooming into 2017 and using daily rather than monthly data, the results season just ended was the fourth consecutive season in which aggregate Results Scores improved. At the start of the year only 9 sectors scored positive. By July the number had fallen to just four – Healthcare, Banks, Utilities and Multi-Industry.
Expressed in terms of share of total, the trends are clearer. The sectors with the largest increases in score since the start of 2017 are Energy, Technology Hardware and Metals. The largest declines in scores are in the Telecommunications, Real Estate and Construction sectors.
The current Results Score Ranking is heading by Energy, Metals, Other Consumer Products, Technology Hardware and Chemicals. The Sectors with the lowest current scores are Banks, Real Estate, Media, Utilities and Building Materials.
The change in share over the last three months is lead by the Energy, Utilities, Healthcare and Machinery sectors. Sectors which have seen a fall in aggregate Results Score are Building Materials, Real Estate, Consumer Services, Restaurants and Construction.
The table below provides all the numbers as well as the Japan Analytics Price Scores and Sector Valuation, Sectors which are in both of either the Top or Bottom 20% in terms of PER and PBR are designated as FP for Fully Prices, MT for Mature, SP for Speculative and DV for Deep Value.
From this analysis the most attractive sectors currently are Energy, Technology Hardware, Chemicals, Wholesale and Machinery. The least attractive sectors are Real Estate, Building Materials, Construction, Consumer Services and Restaurants.
The next post will provide a similar analysis at the Peer Groups level.