See more price target hikes than earnings upgrades: Citi

Brokerage house Citi Thursday said that the third quarter earnings season has been good so far, and the upside/ downside surprise ratio of 15:6 is the best in the last 15 quarters.

However, Citi strategists Aditya Narain and Jitendra Tokas have also pointed that demand continues to slow and that earnings surprises are more at the net profit level and not at the top line level.

"It is more of a bottom-line than a top-line show. Sales growth is down to 13.6% (higher than our 12.7% estimate), reflective of a demand moderation: and we see this trend persisting over the next few quarters," the Citi note said.

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Narain and Tokas also caution that earnings estimates upgrades would be slower than what the market is expecting, though price targets could be raised.

"The market's momentum has raised expectations of earnings upgrades; Citi analysts seem to be playing ball for now, with a 12/7 upgrade / downgrade mix so far. They do however seem more positive on the market than earnings; with a 16/4 target price raise/cut ratio. Let us wait for the earnings season to play through our top-down view remains that upgrades will be slower coming than the market might be beginning to hope for," the Citi note says.