104 out of 262 Korean listed companies, or 40% of analyzed firms, had their annual operating profit forecasts downgraded in the recent 3 months as of May 27, according to financial data provider FnGuide. The downgrades were driven by energy price volatility from prolonged Middle East conflict, domestic consumption slowdown, and interest rate uncertainty. Korean stocks experienced sharp declines on the day, with the KOSPI falling 10.84% and the KOSDAQ dropping 7.71%, reflecting heightened sensitivity to macroeconomic variables amid diverging corporate earnings outlooks.
FnGuide Data Shows 104 Companies Face Earnings Downgrades
FnGuide analyzed 262 domestic listed companies with earnings estimates from three or more securities firms as of May 27. Among these companies, 104 had their annual operating profit forecasts for this year revised downward in the recent 3 months. This represents approximately 40% of the analyzed firms experiencing reduced earnings expectations.
Korea Electric Power and Hyundai Steel Report Significant Forecast Reductions
Companies affected by energy price surges due to prolonged Middle East conflict saw notable forecast downgrades. Korea Electric Power's annual operating profit forecast fell 30.3%. The downgrade reflected increased fuel cost burdens as energy price volatility for international oil and liquefied natural gas (LNG) expanded amid renewed tensions in the Middle East region.
Hyundai Steel's annual operating profit forecast for this year was revised down 27.3% compared to three months prior. The company faced continued profitability pressure from long-term rebar contracts, compounded by rising logistics costs resulting from the Middle East conflict.
HYBE and CJ ENM Experience Entertainment Sector Downgrades
The entertainment and media sectors saw parallel earnings forecast reductions. Valuation contraction across the entertainment industry led to downward revisions for HYBE (-47.8%) and YG Entertainment (-5.8%). Content volatility and reduced advertising spending resulted in lower profit estimates for CJ ENM (-27.8%) and SOOP (-9.0%).
Domestic consumption slowdown impacted consumer-facing stocks. Travel companies including Hanatour (-21.8%) and food service firms such as CJ Freshway (-6.7%) experienced forecast downgrades.
Samsung Electronics and SK Hynix Receive Upward Revisions
Not all sectors experienced negative revisions. Among the 262 listed companies, 157 had their annual operating profit forecasts revised upward. Semiconductor, securities, and financial holding companies benefiting from AI investment trends saw forecast increases. Mirae Asset Securities (36.5%), Korea Financial Group (25.9%), Samsung Electronics (25.3%), and SK Hynix (13.4%) received upward annual operating profit estimate adjustments, supporting overall earnings projections.
KOSPI and KOSDAQ Record Sharp Declines Amid Market Uncertainty
On the day, the KOSPI fell 10.84% compared to the previous trading day, while the KOSDAQ recorded a 7.71% decline. Market analysts attributed the volatility to diverging corporate earnings outlooks combined with interest rate uncertainty, weakened investor sentiment, and foreign investor selling pressure, making the stock market more sensitive to macroeconomic variables.
Lee Sang-heon, researcher at iM Securities, stated that Samsung Electronics and SK Hynix had experienced valuation expansion based on high profit growth rates, but recent earnings announcements raised concerns about growth rate deceleration, leading to valuation adjustments.
U.S. big tech companies' expanded artificial intelligence (AI) investments were identified as market instability factors. Increased corporate bond issuance to fund substantial capital expenditures (CAPEX) widened corporate bond credit spreads and heightened market interest rate sensitivity. Rising corporate bond rates could increase companies' funding costs and raise concerns about potential investment pace slowdowns.
Lee noted that foreign investor selling expanded as hawkish Federal Open Market Committee (FOMC) tone expectations were priced in ahead of the meeting. He stated that uncertainty could partially resolve after the FOMC, potentially establishing a short-term bottom, followed by possible technical rebounds centered on oversold stocks.
FAQ
What percentage of Korean listed companies had earnings forecasts downgraded in recent months?
40% of analyzed Korean listed companies, or 104 out of 262 firms with earnings estimates from three or more securities firms, had their annual operating profit forecasts downgraded in the recent 3 months as of May 27, according to FnGuide data.
Which sectors experienced the largest earnings forecast downgrades?
The energy sector saw significant downgrades, with Korea Electric Power's forecast falling 30.3% and Hyundai Steel's declining 27.3%. The entertainment sector also experienced notable reductions, including HYBE (-47.8%) and CJ ENM (-27.8%), driven by valuation contraction and reduced advertising spending.
How did Korean stock markets perform on the day of the report?
The KOSPI fell 10.84% compared to the previous trading day, while the KOSDAQ recorded a 7.71% decline, reflecting heightened market sensitivity to macroeconomic variables amid diverging corporate earnings outlooks and foreign investor selling pressure.
