Japan Research Pack:A Summary of Select Global Markets Research

The Q3 results season is moving into its second half. Of the 124 companies for whichQ3 Nomura forecasts are available (priority given to recurring profit estimates, otherforecast profit indicators used for companies where recurring profit figures wereunavailable), 82 companies had released results by 3 February. Results beat our preannouncementforecasts by more than 10% at 34 companies and undershot them bymore than 10% at 19 companies. In aggregate, results were broadly in line with preannouncementforecasts. Aggregate results revealed no major changes versus our 27January 2017 Global Research report First impressions of Q3 results at Japanesecompanies. While results appear to have overshot forecasts at a larger number ofcompanies than previously, substantial undershoots at a small number of companiesmeant that aggregate performance was broadly in line with pre-announcementforecasts.

    Of the companies in the Russell/Nomura Large Cap Index (ex financials), 169 hadreleased Q3 results by 3 February. Almost 60% of large cap stocks had released Q3results. These 169 companies on average posted a 2.8% y-y decline in sales and a8.0% rise in recurring profits in Q3 (Figures 1 & 2), versus a 7.1% decline in sales andan 8.8% decline in recurring profits in Q2. Thus far, recurring profits are up y-y in 14 ofthe 19 sectors, and down in five. As in Q2, earnings recovery at commodity-relatedsectors has provided support, but there have also been improvements at a wide rangeof other sectors (Figure 3).

    Companies in the Russell/Nomura Large Cap Index (ex financials) have been steadilyraising their guidance, with FY16 full-year recurring profit guidance changed from a4.4% y-y decline (as of 24 November 2016) to a 2.2% decline and equivalent FY16 H2guidance changed from an 8.3% rise to a 13.3% rise.

    Meanwhile, 22 companies listed on TSE-1 with December year-ends have alsoreleased FY17 guidance. They are projecting a 9.7% y-y rise in sales and a 7.7% risein recurring profits. While companies with December year-ends differ appreciably fromthe overall universe, for example in terms of sector allocation, initial guidance has ahigh degree of validity. This data thus serves as a guide to how companies see FY17panning out.