Sinking Profits Bring Reality Check to AI-Driven Rally in Emerging Market Stocks

 

• Almost half of developing-country companies miss estimates
• Average earnings drop 10% amid sluggish consumer demand

Just as enthusiasm over artificial intelligence and China’s stimulus fades, a familiar weakness has come back to haunt equity investors in emerging markets: sinking corporate profits.

With 96% of companies in the MSCI Emerging Markets Index done with their quarterly results, the earnings season is almost over. And the picture isn’t pretty — Almost half of the companies have missed analyst estimates, average profits have slumped 10% compared with the prior-year period and for every dollar of predicted earnings, companies are bringing home only 86 cents. Two years ago an 18% rise in profits helped EM companies smash projections.

https://www.bloomberg.com/news/articles/2024-06-02/sinking-profits-bring-reality-check-to-ai-driven-rally-in-emerging-market-stocks