[NEWS ANALYSIS]Earnings surprises buoy sentiment

Were Korea`s corporate executives and analysts too pessimistic?

Early this year, many of them expected the worst to come in the first quarter as the global recession accelerated.

But as the earnings season unfolds, it turns out that things were not as bad as had been thought, data showed yesterday.

Fifteen companies, or 70 percent, of the 21 firms which reported first-quarter earnings beat market expectations, according to FnGuide, a local financial information provider.

In particular, leading technology firms posted better-than-expected profits, lifting the stock market that had been weighed on by recession concerns.

LG Electronics, the world`s third-biggest handset maker, posted an operating profit of 437.2 billion won, 201.7 percent higher than the market forecast of 144.9 billion won.

Samsung Electronics and Hynix Semiconductor are also expected to post better-than-expected earnings today. The two computer memory-chip makers are forecast to reduce their losses from the fourth quarter, as memory chip prices rose despite tepid consumer demand. Samsung shares went up 2.96 percent and Hynix shares shot up 4.8 percent at yesterday`s close, driven by hopes for better-than-expected earnings.

Their and other major technology companies` performances boosted the Seoul stock market`s rally in March and April, analysts said.

The benchmark KOSPI jumped 33 percent from the start of March to Wednesday. Hynix shares soared nearly 100 percent and LG Electronics shares jumped 59 percent during the period, while LG Display shares climbed 36 percent and Samsung Electronics shares rose 32 percent.

"Overall, analysts revise upward their profit forecasts for companies. I believe solid corporate earnings will give additional momentum to the stock market," Seong Jin-gyeong, an analyst at Daishin Securities, said.

Builder Samsung Engineering and tobacco firm KT&G also beat analysts` profit projections by 188.5 percent and 142.3 percent, respectively, according to FnGuide.

The country`s refiners, which posted heavy losses in the fourth quarter, are also expected to easily surpass market expectations in the first quarter.

SK Energy, the country`s top refiner, and second-ranked GS Caltex are expected to swing to a profit in the first quarter, helped by improved refining margins as a result of the rise in crude oil prices in January and February, analysts said.

But analysts advised investors to focus on the outlook of companies rather than their first-quarter earnings, saying earnings were already reflected in share prices.

By Jin Hyun-joo



(hjjin@heraldm.com)