Earnings Watch: Monster week ahead for frothy corporates — #SaxoStrats
- Biggest week in corporate earnings for Q4 starts February 6
- Strong US growth setting the bar for lagging Europe
- Europe likely to catch up with US performance in 2017
- Rio Tinto, NVIDIA and BNP Paribas the big three next week
Next week will be a monster for corporate earnings reports. Photo: Shutterstock
By Peter Garnry
Next week is the busiest of the fourth-quarter earnings season with 325 companies reporting among our universe of 1,200 large companies across the world. With growth coming back among US companies and growth around the corner for European companies, optimism is growing among global investors.
In this week's Earnings Watch, we zoom in on the Q4 earnings season so far and the most important companies reporting next week.
Unless commodity prices continue to climb, this forecast seems a bit unrealistic and it is much more realistic that we will see 4-6% revenue growth through 2017.
Growth is back after a two-year headwind
Bank of Italy's real-time euro area GDP tracker stands at 2.75% annualised as of January up from 1.1% in May 2016. We expect this expansion in economic growth to follow through into positive revenue growth among European companies in 2017.
Europe lagging US by perhaps a quarter
Rio Tinto generates 42% of its revenue from iron ore and 28% from aluminium and the remaining split between copper (13%), diamonds & minerals (10%) and energy (7%) making it the most diversified global mining company and thus an important indicator for global economic outlook.
On January 20, we issued a buy recommendation on NVIDIA based on realistic growth assumptions for its auto and datacenter divisions which are currently growing at 60% and 120% y/y.
In general, financials have performed strongly in Q4 and the sector has outperformed which we expect will continue throughout 2017 based on stronger drivers such as lower loan provisions, loan growth and higher capital market activity due to rising rates which also leads to higher net interest income.
Peter Garnry is Saxo Bank's head of equities strategy