Earnings Season in Europe: So Far So Good… But Don’t Miss

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3 out of 10 companies had reported 4Q earnings at the end of last week. On average, 51% beat EPS expectations and 47% did better on sales expectations.

Quant analyst at Bank of America Merrill Lynch digged deeper and uncovered the following trends:

« Sector Top are Oil & Gas (91% EPS beat) and Technology (67%), while Industrials (37%) and Telecoms (25%) are at the bottom.

Countries are Italy (71%) and France (67%) while Switzerland (43%) and Denmark (14%) are worst. »

Style is lead by Value (67%), ahead of Growth (55%) and Risk (54%). Quality lags (50%) but Size is the worst (38%).

« The recent equity market correction has been driven more by defensive sectors than cyclical sectors. This may be in part down to earnings results: 63% of Telecoms stocks and 47% of Healthcare stocks have missed EPS expectations. »

Another feature of the current earnings season is that misses are severely sanctioned.

« Misses have seen near-record losses, underperforming by 3.3% in the 5 days following reporting. So far there have been 27 profit warnings this quarter, lower than previous quarter. But these names have underperformed by 18% in the following 5 days – a record amount. »