Quarterly earnings results cleared a low bar but guidance was mixed: Barclays

Investing.com -The third-quarter earnings season cleared a "low hurdle," but guidance was largely mixed as many companies looked ahead with caution, according to analysts at Barclays (LON:BARC ).

In a note to clients on Wednesday, the analysts led by Emmanuel Cau said per-share income expansion in both the US and Europe recovered on an annualized basis in during the quarter, although, sequentially, growth has "started to stabilize."

They added that while the amount of profit figures topping estimates has been above average, revenue beats have "lagged" in both regions.

Meanwhile, US companies have provided incrementally more upgrades to their financial guidance, but downgrades to the outlook have also increased, the analysts said. Firms in Europe, at the same time, have unveiled lower upgrades and downgrades than in the second quarter, they noted.

"Overall, guidance has been mixed," the analysts said. "[Earnings per share] revisions remain very negative but have started to stabilise in EU and US, with data surprises turning positive most recently."

On a sector basis, cyclical stocks -- which often move in relation with broader economic trends -- have rolled out sharper cuts to their projections than their defensive counterparts. Defensive stocks can provide more consistent dividends and earnings because they tend to be less swayed by wider market trends.

One of the key questions lingering over the latest quarterly results was whether they will support recently elevated stock valuations. According to Birinyi Associates data cited by the Wall Street Journal, the S&P 500 's price-to-earnings ratio -- a gauge of earnings estimates for the next 12 months -- stood at 25.37 last Friday, up from 19.69 a year ago.

The earnings reports, along with US economic data and Donald Trump's presidential election victory, have been cited by analysts as tests of the staying power of these frothy valuations.

Source: Investing.com