European companies have registered as a growth in their profits for the second quarter for the fifth consecutive quarter, but is lagging behind the United States due to the strengthening of the euro and the difficulties found by consumers in a context of commercial tensions.
Profit in the second quarter of European companies should have increased by 3.1% compared to the same period last year, according to LSEG I/B/E/O data. A little more than half of the companies that have published their results have exceeded the estimates of analysts, which usually corresponds to a usual quarter.
Here are five lessons to learn from the results of the second quarter in Europe:
Low results but positive perspectives
The growth in the profits of European companies is much lower than that of the United States, which should reach 12% thanks to the performance of the technological sector.
In spite of everything, the groups of the old continent remain optimistic. “If we observe the situation as a whole, about 30% of the companies have reviewed their forecasts up and very few of them have reviewed them, which is surprisingly positive,” said Maximilian Uleer, head of research on European actions and multiple strategies in Deutsche Bank.
“We believe that this observation is very important and that this issue will continue, because companies have a better visibility in the deceleration risks,” he added, referring to the recently announced trade agreement between the United States and the European Union.
The euro weighs
The monetary strategists bet that when US customs tasks would enter into force, the dollar would strengthen, in particular compared to the euro, thus attenuating the impact of taxes imposed by US President Donald Trump on exporters.
But the unique currency appreciated more than 12% compared to Greenback this year, and European companies export strongly have felt the negative effects.
“The big companies are generally more diversified worldwide, generate more income outside of Europe and, with the vigor of the euro, this obviously constituted a brake on their results,” observes Rory Dowie, Marlborough portfolio manager.
According to Barclays, a 10% evaluation of the euro leads to a drop of approximately 2% of the results of the companies in the monetary blockade. Citi believes that the basic sectors of resources and energy are more sensitive to fluctuations of the exchange rate.
However, a wide range of companies has reported negative effects related to exchange rates, including Allianz, Bayer, Continental, Ferrari, Totalnerne and Puma.
Unstoppable banks?
The Seven Banks of the Eurostoxx 50 index exceeded expectations for the results of the second quarter, and two of them set their goals. The Pan -European climber in the sector has risen to its highest since 2008 and the global financial crisis.
The financial groups registered results greater than 12% to the analysts’ forecasts, when this figure reaches 5.5% for the Stoxx 600 index as a whole, according to the data of LSEG I/B/e/s.
“In Europe, banks have been the main engine of this season, while in other sectors, such as the car and discretionary goods, we are witnessing strong downward reviews,” says Alberto Tocchio, responsible for global actions and topics in Kairos Partners.
However, after the bank manifestation of the stock market, a certain precaution is established. Bofa has advised long -term investors to cover their exposure, warning that banks could be vulnerable in case of economic slowdown.
The health sector under observation
The health sector has registered its growth of 15% profits in the second quarter, which makes it the second most efficient sector in Europe behind technology.
But investors are still cautious given the threat of donald Trump customs tariffs, which plans to impose an import tax of up to 250%.
“We are still very cautious about this sector despite the growth of the results,” said Maximilian Uler in Deutsche Bank, referring to the threat of customs tasks. “
If we get certainty at some point, they could consider moving from a subponderation to an overload, “he adds.
Consumer difficulties
Investors move away from consumer actions because mediocre results and prudent perspectives emphasize the vulnerability of the sector compared to customs duties and the evolution of consumption habits.
Companies, from luxury to basic needs, find it difficult to find a balance between costs and fragility of demand, particularly in the key market in the United States, which forces them to make difficult pricing and strategy decisions.
“All those exposed to consumption, in particular the services, are really affected,” says Arun Sai, a multiple senior strategist in Pictet, emphasizing that the market has underestimated the scope of the deceleration already observed in the United States.
According to LSEG I/B/E/O data, the results of companies in the cyclic consumer goods sector, such as car manufacturers and luxury brands, were 8% lower than forecasts.
In the stock market, the sanction was immediate. Adidas lost 18% in six days after the warning that he may have to increase his prices in the United States.
The AB Inbev brewer fell 11% in a single session due to the weakness of the demand in Brazil and China, which has weighed in volumes.
Even the luxury sector has not been saved. Ferrari fell by 12%, his highest drop never recorded, after announcing a price drop in the United States. Hermès accused a 12% drop in three days after the publication of her results.
Source: BFM TV
