Italian Equity Market: 4Q23 Results – "Normalisation" and "Transition Year", most frequent watchwords

The Q4 2023 results season saw a slight increase in positive surprises, breaking a downward trend that had lasted since 3Q22, i.e. for 5 quarters: 'Above expectations' announcements accounted for 40% of the total (vs. 37% last quarter), 'In line' results were 43% and 'below expectations' results were 16%, in our preview sample of 99 companies.

In Q4, Financials performed slightly better than the previous quarter in terms of positive surprises. In particular, Banks still benefited from growth in net interest income, and improved fee income, with a lower cost of risk and solid capital generation. Asset Management was supported by performance fees and net interest income, with an attractive dividend policy. Insurance confirmed a good performance in Non-Life business and improved financial revenues.

Among Non-Financials, price mix and cost efficiencies balanced slightly lower volumes and a negative impact from foreign exchange, with an improvement in cash generation. Luxury Goods realised an improvement in Asia, while Europe suffered from the exchange rate factor. The automotive sector benefited from an improved price mix that balanced out weak volumes and a negative exchange rate factor, with good cash generation. Construction reported better selling prices, and Pharmaceuticals fell short of expectations. The Oil & Gas sector was well supported..

For guidance on 2024, the most recurring words among Non-Financials were 'normalisation' and 'transition year'. The scenario looks better for Financials, which should benefit from high interest rates for a longer period, with an improved capital distribution.
 

SOURCE Intesa Sanpaolo Research elaborations on Company data