This is the weakest quarter for at least two years for STOXX 600 company earnings
More than half of STOXX 600 had reported third-quarter earnings by Wednesday, looking at the reporting season that began around mid-September. Recent earnings have seen aggregate mathematics for the quarter improving. But even then, Q3 2019 is still set to be the weakest for at least two years, both in terms of earnings and for revenues, as shown below.
Consensus forecasts from institutional investors, compiled by Refinitiv, blended with actual performance in the quarter so far, point to an earnings decrease of 6.6% on average, compared to Q3 2018. Excluding the volatile energy sector, earnings are expected to decrease 3.7%. As for revenues, these are expected to increase 0.8% from Q3 2018. With energy out of the picture, average top-line growth would look better at 3.2%.
STOXX 600 year-on-year growth rates
Despite the recent quarter being one many European firms would prefer to forget, the extent of low expectations that preceded the reporting season is underlined by the above-trend rate of companies that have beaten expectations. 57.3% reported results exceeding analyst estimates. In a typical quarter, 50% beat analyst EPS estimates, according to Refinitiv data. Furthermore, the trend of analysts’ earnings estimates combined with ‘actuals’ has been rising from an even lower base, if compared with expectations from late-October.
STOXX 600 Q3 2019 estimates/actuals trend
The impact on sentiment helps explain why the STOXX gauge continues to linger near its best levels in almost two years, even as global markets appear to face fresh turbulence on Wednesday from the latest twist in the trade saga. The baked-in case for easy European Central Bank policy to continue for the foreseeable future is another prop. Given the STOXX index’s near-20% rise in the year to date, markets are almost certainly pricing an eventual positive outcome on the trade front too. But these price gains are also ramping up valuations even as European earnings and growth expectations remain at a low ebb and Eurozone economic counters are declining. Fresh uncertainties or extended delays in the grind towards a resolution Washington’s and Beijing’s dispute alone, could raise the risk of a significant stock market correction.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.