Industrial Investors Brace for Disappointing 2H24 amid Anticipated Misses and Downward Guidance Revisions; Sights Turn to 2025 for Which Optimism is Building
Industrial Investors Brace for Disappointing 2H24 amid Anticipated Misses and Downward Guidance Revisions; Sights Turn to 2025 for Which Optimism is Building
Survey Finds Notable Sentiment Divergence Resulting in Bull-Bear Barbell; Outright Bearishness at Highest Level in 12 Months with More Downward Guidance Revisions Expected
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Broadly, executives point to a continuation of consumer trends seen in recent quarters, with affordability and strained budgets shifting spending away from higher-ticket discretionary items. That said, while many characterize the environment as challenging — and expect it to remain so in the near term amid macro headwinds and U.S. election uncertainty —executives continue to express cautious optimism toward 2025 with hopes for an improved environment once Fed rate cuts have had a chance to work their way through the system.
Against this challenging macro backdrop, more companies across the sector are lowering revenue guidance than raising. Homebuilders point to buyers remaining on the sidelines amid the volatile interest rate backdrop, with mortgage rates having marched higher, reversing the pullback that came in anticipation of the Fed’s September rate cut. Companies tied to home improvement and automotive markets also cite sluggish demand, particularly for higher-margin discretionary items. Across restaurants, companies are doubling down on value offerings, with some citing strong traction in Q3 and heading into Q4.
At the same time, while top-line dynamics are challenged, companies are offsetting weaker sales through operational efficiency and cost reductions, positioning them for future growth once demand recovers. To that end, more Consumer Discretionary companies are raising EPS guides than lowering so far this quarter. Indeed, with 53% having raised EPS guidance thus far, the sector is outpacing our all-company group at 48%.
Regionally, Europe remains soft with sluggish economic growth and depressed real wages weighing on consumer sentiment. And in China, while consumer trends have worsened and are not seen rebounding near term, executives retain some longer-term optimism for the market. Ex-China, India remains a pocket of strength in Asia.
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