JM Financial reports sharp cut in EPS by over 10% and target price for FY25 for small and midcaps after Q2 earnings

In its earnings report JM Financial highlighted that after weak Q2 earnings, investors alongside the continuing correction on the Street have turned jittery. Further it added that based on the analysis of 157 companies who have reported out of the JM Financial coverage universe of 275 companies, it highlighted that:

4% (69 companies) missed expectations, 41% (65 companies) beat expectations while 15% (23 companies) were inline.

27% (43 companies) have reported weaker revenue growth than expected.

There is a slowdown in urban demand seen across FMCG, retail, auto and mall operators.

Chemicals and consumer durables have also seen a moderation in demand (5) MFIs and select private sector banks/ NBFCs witnessed stress in their unsecured book. 

Now adding to the this, the brokerage in another report dated November 14 pointed a significant decline in EPS for small and midcap category along with the target price.

Adding the brokerage said that in order to ensure  that we take into consideration a broader view, we have also analysed consensus EPS and target prices revision post results for the JM Financial coverage universe and observe that:

66 per cent companies saw EPS cuts for FY25

45 per cent of the companies saw cuts in target price post Q2FY25

For FY25, a larger % of small and midcaps (SMIDs) witnessed EPS cuts (>0%, 3%, 5% and 10%) and

larger % of small and midcap (SMIDs) saw > 10% EPS cut (17 per cent and 23 per cent of mid and smallcap companies saw EPS cuts of this scale). This number was much lower at 10% for large caps, added the report.

What this EPS cut may mean for investors?

Generally, the earning per share that is a profitability metric cut may impact investors negatively and their perception of the stocks, its price, valuation and an overall investment strategy. In a typical environment, the EPS is evaluatd for better informed decisions.