Analysis of 3Q Earnings Calls Shows GCC Not Immune to Challenging Market Conditions
30 November 2022 | Admin
Iridium Advisors’ proprietary AI-aided analysis of 6.7 million words from 1,300+ historic GCC earnings calls provides insight into what management teams, analysts and investors are telling the market
The overall management sentiment for earnings calls hosted by GCC companies between 1 October and 17 November 2022 has decreased, according to a new AI-powered analysis by Iridium Advisors. The company found that its GCC Earnings Call Sentiment Index dropped 8% quarter-on-quarter to its lowest level since the first fiscal quarter of 2021.
The trend in sentiment continues to broadly track corporate profitability and the MSCI GCC Index, which also declined over the last quarter and coincides with a decrease in the number of companies that have "beaten" analyst estimates in FQ3 2022. Iridium Advisors found that the percentage of companies that missed analysts' earnings estimates this quarter grew to 50%, up from 34% in FQ2 2022.
Oliver Schutzmann, CEO, Iridium Advisors, said, "This is the first quarter in over a year that we have seen a marked decline in management sentiment. While equity markets in the region have performed better than those in the US and Europe, we can't discount the fact that regional equity markets are not immune to larger global market contractions, rising interest rates, inflationary pressures, oil price volatility, and fears of recession."
Interestingly, the research shows somewhat mixed trends across GCC countries. While Kuwait and the United Arab Emirates were the only two countries that showed a slight increase in sentiment by management teams, the negative trend was most pronounced in Oman and Bahrain and, to a lesser extent, in Saudi Arabia. Across industries, real estate was the only sector wherein management teams showed a slight increase in positive sentiment. On the other hand, Materials and Communication Services saw the largest declines in sentiment.
"Although management sentiment declined during FQ3 2022, their 'confidence' — a measure of how strong or weak the language used during earnings calls is — increased. As confidence is often a leading indicator of sentiment, it will be interesting to see if management sentiment will rise again in upcoming reporting cycles or continue its downward trajectory," concluded Schutzmann.