Earnings Season Face Off – Western Europe KO'd by America!
With approximately a quarter of the companies having reported in Western Europe and North America we evaluate how the earnings season is shaping up.
U.S - You Beauty!
Surprisingly, the U.S. has experienced positive Sales Growth and Sales Surprises across the board with average increases of 12.5% and 2.7% respectively. Earnings are up by an average of 18.5% with the commodity related sectors Basic Materials and Oil & Gas up a whopping 45.2% and 49.6% respectively. Chart 1 below illustrates a break down of the season thus far and overlays the performance of the S&P 500. Interestingly, investors appear more focused on macro concerns and their effect on future earnings of companies (with the S&P500 declining in the last week) than the presently impressive earnings season.
Europe - Ugly Duckling!
Europe, on the other hand, is another story as shown in Chart 2 below. Whilst EPS growth remains mixed, EPS Surprise is negative for all the sectors (average of -11.5%) except Basic Materials. Consumer Services performance is astonishing with negative EPS Growth and EPS surprise of 71.5% and 63.8%! Earnings within Europe are being affected by continued cost inflation, ongoing EUR strength vs. the USD and ‘mismanaged’ earnings expectations leaving investors and analyst hopes dashed.
If the earnings season continues in this fashion Western Europe is set for a bumpy ride!