« This monthly note contains the most up-to-date consensus earnings developments for regions, countries and sectors by region. It covers European sectors in more detail and contains data for European Stoxx 600 companies.
Global earnings for 2012E as well as for 2013E have been downgraded by 0.7% over the last month (mid August to mid September). This downgrade momentum is lower than the trend observed over the previous three months (2012E earnings now have been downgraded by over 15% throughout the past fourteen months of consecutive downgrades). Materials (-5.7%) continued to be the key driver of the downgrades in global earnings despite a pick-up in commodity prices over the last month. Utilities too witnessed significant downgrades in the past month (-3.1%).
In Europe, earnings downgrades follow what deteriorating economic leading indicators already suggested – albeit at a slower pace relative to the previous months.
The Stoxx600 earnings for 2012E have been downgraded by 1.0% over the last month which is less than the 2.0% downgrade witnessed over each of the previous two months. 2013E earnings were downgraded by 1.1% last month. However, it is too early to call for a trend reversal, in our view, and we maintain our neutral view on European equities for the time being.
Relative to the US, European downgrade momentum remained stronger as the S&P 500’s 2012E earnings only saw a marginal downgrade of 0.1% over the last month versus -2.1% over the past 3 months. On the contrary, Japan (-3.9%) and Emerging Markets (-1.8%) faced stronger downgrades in the last month.
Among the major European countries, Switzerland, France and Germany have held up best with only marginal downgrades over the past month while the UK (-1.4%) and Italy (-2.4%) have seen stronger downgrades. Portugal (-9.6%), Spain (-7.2%) and Greece (-6.0%) continue to see pronounced downgrades of 2012E earnings (see page 12).
Among European sectors, Materials drove the earnings downgrades with Basic Resources witnessing an 8.7% downgrade in 2012E earnings over the last month. Banks (-3.5%) and Construction (-1.7%) also faced strong downgrades while Financial Services (+1.6%), Autos (+0.9%) and Utilities (+0.7%) observed upgrades to 2012E earnings last month. »