The first-quarter 2026 corporate earnings season broadly met expectations, although the number of companies outperforming forecasts fell sharply while earnings misses increased, according to CGS International Securities Malaysia.
In a market strategy report, the research house said 65% of the companies under its coverage delivered core net profit (CNP) results that were in line with expectations during the quarter. However, only 7% exceeded forecasts, a significant decline from 29% recorded during the previous quarter’s reporting season.
Meanwhile, the proportion of companies missing expectations rose to 27% from 22% in the fourth quarter of 2025.
Overall, first-quarter earnings accounted for 21.8% of CGS International’s full-year 2026 core net profit forecasts before post-results revisions were made.
Following the reporting season, analysts raised earnings forecasts for 12 stocks, lowered projections for 20 counters and left estimates unchanged for 59 companies as of June 4.
The research house noted that the earlier timing of Hari Raya this year created some distortions in year-on-year comparisons, affecting the interpretation of headline earnings performance.
Among key trends observed during the quarter, CGS International said underlying business conditions remained positive for the financial services and plantation sectors despite reported year-on-year declines in core profits.
The petrochemical, property and automotive sectors recorded the largest increases in absolute earnings compared with a year earlier, while financials, utilities and plantation companies registered the biggest declines in absolute profit terms.
Looking ahead, CGS International expects corporate cost pressures to intensify in the second quarter due to ongoing geopolitical tensions in the Middle East.
Although the stronger ringgit could partially offset higher costs, the research house expects companies to pass on rising expenses to customers gradually, potentially resulting in margin compression in the near term.
Businesses operating under fixed-price contracts, particularly in the construction and property development sectors, are seen as more vulnerable to rising costs.
However, CGS International noted that unsubsidised diesel prices, which had been a major concern for many companies, have recently moderated, although fuel prices remain susceptible to geopolitical volatility.
The report also highlighted growing political uncertainty following the dissolution of the Johor State Legislative Assembly on June 1, paving the way for state elections that must be held within 60 days.
CGS International expects market volatility to increase as investors speculate on the timing of Malaysia’s next general election.
Government-linked projects, regulatory approvals, mergers and acquisitions involving government-linked companies (GLCs), as well as major infrastructure awards, could face delays amid heightened political activity.
The research house identified ongoing asset monetisation initiatives by telecommunications group Axiata and future power generation project awards as areas that may be affected by regulatory timing considerations.
Despite these near-term challenges, CGS International maintained a constructive outlook on the Malaysian equity market and retained its end-2026 target of 1,810 points for the benchmark FTSE Bursa Malaysia KLCI.
The research firm slightly lowered its forecast for KLCI earnings growth in 2026 to 11.7% from 14.1% previously, mainly due to downward revisions in earnings expectations for financial and utility companies.
Nevertheless, CGS International believes the earnings outlook for its high-conviction stock selections remains intact and views any election-related market weakness as a buying opportunity.
Its preferred stocks remain unchanged, comprising banking groups Malayan Banking Berhad and RHB Bank Berhad, utility giant Tenaga Nasional Berhad, plantation companies SD Guthrie Berhad and Ta Ann Holdings Berhad, logistics and energy firms MISC Berhad and Westports Holdings Berhad, telecommunications players Telekom Malaysia Berhad and Axiata Group Berhad, as well as Gamuda Berhad, MR D.I.Y. Group (M) Berhad, Sime Darby Berhad, Fraser & Neave Holdings Bhd, Malayan Cement Berhad, Malakoff Corporation Berhad and Hap Seng Plantations Holdings Berhad.
