[ad_1]
Article content material
By Michael Msika and Macarena Munoz
(Bloomberg) —
Price pressures, supply-chain chaos and a reopening letdown are set to plague Europe’s third-quarter earnings season, setting buyers up for extra disappointment than elation.
Whereas sturdy numbers from behemoths like LVMH and SAP SE reassured European inventory buyers final week, additional excellent news could also be wanted to maintain the rally alive. Rising inflation and a stalling world restoration pose a problem to additional market good points.
Commercial
This commercial has not loaded but, however your article continues under.
Article content material
“We anticipate fewer constructive earnings surprises, extra cautious company steerage and fewer earnings upgrades by analysts,” mentioned Robert Greil, chief strategist at German non-public financial institution Merck Finck.
Right here’s what buyers are going to be watching as firms roll out their outcomes:
Logistical Nightmares
Pandemic-related chaos, post-Brexit customs checks and a scarcity of truck drivers have wreaked havoc on provide chains.
Clothes firms have been sounding the alarm forward of the all-important vacation season, with on-line retailer Asos Plc warning that supply-chain issues are set to hit revenue, whereas Hennes & Mauritz AB and Boohoo Group Plc have flagged supply delays. Asos and Boohoo shares plunged after the bulletins.
Commercial
This commercial has not loaded but, however your article continues under.
Article content material
“We anticipate firms to wrestle with provide constraints and rising enter costs,” mentioned Salman Ahmed, world head of macro and strategic asset allocation at Constancy Worldwide.
Shares to look at embrace: Sportswear retailers Puma SE (earnings due Oct. 27) and Adidas AG (Nov. 10), on-line retailer Zalando SE (Nov. 3), delivery agency A.P. Moller-Maersk A/S (Nov. 2), industrial group Siemens AG (Nov. 11).
Rising Prices
Prices have been climbing for firms, a product of provide bottlenecks, surging commodity costs and a scarcity of staff. Buyers shall be watching intently which corporations need to swallow rising costs and that are in a position to go them on to clients.
“Particular consideration should be paid to the influence that logistical issues in provide chains, rising vitality prices and upward strain on labor prices might have on outcomes,” mentioned Jose Antonio Montero de Espinosa, head of European equities at Santander Asset Administration. “In the course of the third quarter we’ve got witnessed one of many intervals with the best improve in inflation expectations in Europe.”
Commercial
This commercial has not loaded but, however your article continues under.
Article content material
Power producers could possibly be pure beneficiaries. The Stoxx 600 Power Index is up 19% over the previous three months and is the top-performing sector in Europe. Earnings progress estimates for the sector have accelerated over the previous few weeks as oil and fuel costs have soared.
Shares to look at embrace: Dairy-products maker Danone SA (Oct. 19), fertilizer producer Yara Worldwide ASA (Oct. 20), household-products firm Reckitt Benckiser Group Plc (Oct. 26), brewer Anheuser-Busch InBev SA (Oct. 28), chemical compounds maker Solvay SA (Oct. 28), oil majors Royal Dutch Shell Plc (Oct. 28), TotalEnergies SE (Oct. 28) and BP Plc (Nov. 2).
Chip Crunch
The lockdowns pressured many individuals to conduct their lives within the digital realm, which boosted demand for devices. Consequently, demand for the chips that energy these units rocketed, hitting automakers to smartphone giants like Apple Inc.
Commercial
This commercial has not loaded but, however your article continues under.
Article content material
The chip scenario doesn’t look set to ease any time quickly, judging by the early warning indicators from the automotive sector. Elements provider Faurecia SA and truck producer Traton SE minimize forecasts final month, whereas Volkswagen AG mentioned that it faces a big order backlog because of a scarcity of chips.
Nonetheless, the chipmakers themselves may benefit. A latest replace from Taiwan Semiconductor Manufacturing Co. confirmed that demand stays strong, with the Asian bellwether’s projections for the fourth quarter beating some analysts’ estimates.
Shares to look at embrace: Semiconductor-equipment maker ASML Holding NV (Oct. 20), auto-chip suppliers STMicroelectronics NV (Oct. 28) and Infineon Applied sciences AG (Nov. 10), carmakers Volkswagen AG (Oct. 28) and Stellantis NV (Oct. 28)
Commercial
This commercial has not loaded but, however your article continues under.
Article content material
READ: For Tech With Value Energy, Inflation Is Good Information: Taking Inventory
Reopening Letdown
It’s been actuality test time for firms that received a lift through the lockdowns, now that restrictions have eased. Distant software program maker TeamViewer AG plunged 25% within the area of sooner or later after slicing forecasts because of weaker demand from enterprise clients. On-line meals supply firm Simply Eat Takeaway.com NV was one other casualty, dropping after posting a slowdown so as progress.
“The market shall be extra demanding with these sectors which have carried out very positively this yr,” mentioned Cristina Benito, head of equities for discretionary portfolios at Mapfre Asset Administration.
Shares to look at embrace: Meals-delivery agency Deliveroo Plc (Oct. 20), computer-hardware maker Logitech Worldwide SA (Oct. 26), meal-kit maker HelloFresh SE (Nov. 2), mobile-messaging software program maker Sinch (Nov. 2).
Commercial
This commercial has not loaded but, however your article continues under.
Article content material
READ: TeamViewer Warning a Wake-Up Name for Europe’s Lockdown Darlings
General, earnings expectations for the third quarter are excessive, with analysts predicting about 60% progress for firms within the Stoxx 600. Nonetheless, the financial backdrop has turn into much less favorable and analysts are slowing the tempo at which they’re elevating revenue estimates.
“We predict the rebound in Stoxx 600 EPS has largely run its course, with our macro projections in keeping with solely marginal additional upside by early subsequent yr,” Financial institution of America Corp. strategist Milla Savova mentioned in emailed feedback.
©2021 Bloomberg L.P.
Bloomberg.com
Commercial
This commercial has not loaded but, however your article continues under.
[ad_2]
Source link