Inflation outlook may cloud resilient European earnings updates

* STOXX 600 Q1 earnings seen up around 25%

* Focus on pricing power, margins, demand

* Profit revisions have turned negative

By Joice Alves and Danilo Masoni

LONDON, April 20 (Reuters) - European companies are forecast to have coped with record inflation in the first quarter, but the big question for investors during the reporting season which begins in earnest next week will be their outlook for the rest of 2022.

Profits are expected to have grown by 25% in the three months to end-March, a much lower pace compared to the 60-150% rates of 2021 but possibly solid enough to reassure markets.

Kasper Elmgreen, head of equities at Amundi, expects first quarter results to be "okay" but is focused on price pressures and uncertainty resulting from the Ukraine crisis.

"It's super, super, super important for us to understand what are the abilities of the companies of passing on the cost increases onto the consumers," Elmgreen said.

"What are they going to say about pricing? What are they going to say about volume? What about mix margins? And can they say anything about the demand outlook?" he added.

Firms on the STOXX 600 .STOXX regional equity benchmark are expected to report a rise of 24.7% in first-quarter profit, the latest Refinitiv I/B/E/S data shows, up from the 14.6% growth rate expected at the start of the year.

Much of that, however, is due to the energy sector which has a 5.9% weighting in the index, excluding which profit growth is expected to stand at just 6.8%.

Morgan Stanley expects earnings to beat estimates this quarter, but says that given the stagflationary backdrop and margin pressures a new earnings downgrade cycle may lie ahead.

"Corporate guidance is likely to be more important than ever this quarter and should set the tone for price action," the U.S. investment bank said in a note, pointing to upside earnings potential for industries like energy, drugs and utilities.

Luxury goods are also seen as resilient to inflationary pressures given their pricing power. LVMH LVMH.PA last week said it would continue to raise prices despite geopolitical tensions and lockdowns in China.

On the other hand, Morgan Stanley warns of downside risk for sectors like banks, construction companies and capital goods.

Among the major companies reporting next week are consumer goods giant Unilever UNc.S , Nivea maker Beiersdorf BEIG.DE as well as banks UBS UBSG.S and Barclays BARC.L .

Strategists at money manager BlackRock, meanwhile, see the economic effects of the Ukraine crisis eating into earnings even as analysts have been revising up estimates across the board.

Refinitiv data shows analysts now expect 2022 earnings in Europe to grow by more than 11%, up from 7% in January. This is despite earnings revisions, the number of upgrades minus downgrades, turning negative for the first time since late 2020 in a sign of slowing momentum.

Other analysts do not appear to be overly worried.

Mislav Matejka at JP Morgan says a recession looks unlikely for now and earnings should continue to grow, supporting equities, as the scale of downward revisions is not dramatic.

"Most (people) we speak to expect warnings, so even if the actual results are mixed, stocks may not be penalized further," Matejka said in a note.

Caroline Simmons, UK Chief Investment Officer at UBS Global Wealth Management, said all eyes will be on the consumer staples sector, although she does not expect any major snags.

"Some of the staples areas might show some margin pressure, but it wouldn't be that big overall because they usually can offset it with price increases," she said.

European earnings revisions Link
STOXX Q1 earnings estimates Link

Reporting by Joice Alves, Danilo Masoni and Lucy Raitano;
Editing by Alexander Smith

免責聲明: XM Group提供線上交易平台的登入和執行服務,允許個人查看和/或使用網站所提供的內容,但不進行任何更改或擴展其服務和訪問權限,並受以下條款與條例約束:(i)條款與條例;(ii)風險提示;(iii)完全免責聲明。網站內部所提供的所有資訊,僅限於一般資訊用途。請注意,我們所有的線上交易平台內容並不構成,也不被視為進入金融市場交易的邀約或邀請 。金融市場交易會對您的投資帶來重大風險。


本網站的所有XM和第三方所提供的内容,包括意見、新聞、研究、分析、價格其他資訊和第三方網站鏈接,皆爲‘按原狀’,並作爲一般市場評論所提供,而非投資建議。請理解和接受,所有被歸類為投資研究範圍的相關内容,並非爲了促進投資研究獨立性,而根據法律要求所編寫,而是被視爲符合營銷傳播相關法律與法規所編寫的内容。請確保您已詳讀並完全理解我們的非獨立投資研究提示和風險提示資訊,相關詳情請點擊 這裡查看。

我們運用 cookies 提供您最佳之網頁使用經驗。更改您的cookie 設定跟詳情。