Results weak, outlook bleak
More companies have missed estimates than have beaten them
Earnings results in Europe have come in below expectations since companies started reporting two weeks ago. With 53 companies having reported so far (34% of the total number we expect to analyze), 28% of companies beat consensus by more than 5%, while 40% missed by the same margin. On an absolute basis, 49% beat consensus and 49% missed. Results have been better for larger stocks. Basic Resources and Telecoms have had the weakest results relative to expectations. Few sectors stand out on the positive side. There are significant shortcomings of the analysis of quarterly earnings in Europe. We include in our analysis firms in which at least two analysts had estimates in I/B/E/S on July 15 and expect to analyze 155 companies over the course of the earnings season.
Estimates continue to come down
Over the past month, both 2008 and 2009 estimates have been revised down 2.1%. Year-to-date, 2008 consensus estimates have fallen 9.3% and 2009 estimates have fallen 6.6%, and growth is now expected to be 1.6% this year and 12% in 2009. We believe that consensus estimates for 2008 and 2009 remain too high. Our top-down estimate is for an earnings fall of 6% in 2008 and a further fall of 5% in 2009. Weakness in Financials has been offset by strength in Oil & Gas, Basic Resources and Chemicals.
The number of large negative surprises has dramatically increased
The number of large negative revisions has spiked in recent months. Over the last month, over 70 companies have had consensus expectations revised down by more than 5%. Negative revisions have been quite broad as well: two-thirds of the index had 2009 estimates revised down in July.
Results have been stronger in the US
So far, 259 companies have reported 2Q results (62% of total cap). 49% of companies reporting have beaten estimates (above the historical average of 45%) and 14% have missed estimates (versus the average of 14%).
More companies have missed estimates than have beaten them
Earnings results in Europe have come in below expectations since companies started reporting two weeks ago. With 53 companies having reported so far (34% of the total number we expect to analyze), 28% of companies beat consensus by more than 5%, while 40% missed by the same margin. On an absolute basis, 49% beat consensus and 49% missed. Results have been better for larger stocks. Basic Resources and Telecoms have had the weakest results relative to expectations. Few sectors stand out on the positive side. There are significant shortcomings of the analysis of quarterly earnings in Europe. We include in our analysis firms in which at least two analysts had estimates in I/B/E/S on July 15 and expect to analyze 155 companies over the course of the earnings season.
Estimates continue to come down
Over the past month, both 2008 and 2009 estimates have been revised down 2.1%. Year-to-date, 2008 consensus estimates have fallen 9.3% and 2009 estimates have fallen 6.6%, and growth is now expected to be 1.6% this year and 12% in 2009. We believe that consensus estimates for 2008 and 2009 remain too high. Our top-down estimate is for an earnings fall of 6% in 2008 and a further fall of 5% in 2009. Weakness in Financials has been offset by strength in Oil & Gas, Basic Resources and Chemicals.
The number of large negative surprises has dramatically increased
The number of large negative revisions has spiked in recent months. Over the last month, over 70 companies have had consensus expectations revised down by more than 5%. Negative revisions have been quite broad as well: two-thirds of the index had 2009 estimates revised down in July.
Results have been stronger in the US
So far, 259 companies have reported 2Q results (62% of total cap). 49% of companies reporting have beaten estimates (above the historical average of 45%) and 14% have missed estimates (versus the average of 14%).
