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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 03 November 2017 at 14:03 GMT

Earnings Watch: Celebrating three-year drawdown in global revenue

Head of Equity Strategy / Saxo Bank
Denmark
  • Adidas, Siemens and NVIDIA among the bluechips to report earnings next week
  • EBITDA is the highest levels since Q2 2008 but only in nominal terms
  • Revenue still lags though operating income has rebounded decently

Adidas

Sprinting onwards: Adididas is the fastest-growing of the big sportswear companies. 
Pic: Sorbis / Shutterstock.com

By Peter Garnry

The earnings season is half way through globally and the good news is that quarterly EBITDA is the highest levels since Q2 2008 but the depressing thing is that this is in nominal terms. Adjusting for inflation, global operating earnings is still stuck in the mud. As a result the main driver behind the equity market rally since 2009 has been valuation multiple expansion.

MSCI World profit growth
Source: Bloomberg and Saxo Bank 

While operating earnings have rebounded well since the collapse in oil and the strong USD regime, revenue is still lagging. Revenue in Q3 still below the level from Q3 2014, so basically a three-year drawdown in global revenue.

Revenue growth
Source: Bloomberg and Saxo Bank 

The most interesting earnings releases next week...

Adidas
  • The fastest growing big sport athletic retailer with EPS expected to grow 36% in Q3 on top of 10% revenue growth
  • Analysts will focus on EBITDA margin as this is the single biggest potential for the share price as Adidas' margin is 5%-points lower than Nike's
  • China is important segment to watch – potential downside risk

NVIDIA
  • Stock is close to all-time-high around $206 per share
  • Very high expectations with EPS expected to grow 14% y/y and revenue is expected to grow 18% y/y
  • Potential downside risk is data center segment where Intel is catching up
  • We expect strong performance in gaming to continue
  • One of the most richly valued stock in the US technology segment

Siemens
  • Bellwether of European industry with positive beta to global economic expansion
  • Consensus is expecting EPS growth of 20% y/y and revenue growth of 4% y/y
  • If General Electric's Q3 earnings release is any guidance there is significant downside risk to results, especially the outlook
  • Potential catalyst is health care segment which is showing strength

The table shows the top 30 companies reporting Q3 earnings next week. 

Top 30 earnings releases
Source: Bloomberg and Saxo Bank 


– Edited by Clare MacCarthy

 

Peter Garnry is head of equity strategy at Saxo Bank

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