Japan Companies May Have Missed Initial Profit Forecasts by 18%

(Bloomberg) -- Japanese companies whose fiscal years ended in March may have seen profits fall short of their initial forecasts by 18% in an early sign of how the virus outbreak is hitting the country.

Full-year net income of listed companies is on track for a total of 27.4 trillion yen ($258 billion), compared with guidance of 33.2 trillion yen given at the end of May last year, according to data compiled by Bloomberg. The total is based on results for the 279 companies that had reported as of May 1 and guidance for the remaining 2,154 firms, including revisions to earlier forecasts.

Sentiment may rebound once all the results are out, on the view that the market has factored in negative news, said Hideyuki Ishiguro, a senior strategist at Daiwa Securities Group Inc. in Tokyo.

“An approximate 20% shortfall wouldn't be surprising,” Ishiguro said. “The question is whether that will be the end of it.”

Read more: More Than 200 Listed Japanese Companies Have Cut Their Forecasts

The Topix capped its first monthly advance for this year in April with a 4.4% gain after plunging almost 17% over the prior two months as the impact of the coronavirus swept through global economies. The Nikkei 225 Stock Average snapped back into bull-market territory last month after falling into a bear market in March.

Shogo Maekawa, a strategist at JPMorgan Asset Management Ltd., expects range-bound trading to last for a while as risks remain. While optimism of a recovery helped the market to rally in April, further gains after the earnings season may be difficult, he said.

”I don't think the trend can be maintained, because earning will be weak,” he said.

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