{"id":1450685,"date":"2024-01-15T13:45:00","date_gmt":"2024-01-15T18:45:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1450685"},"modified":"2024-01-15T13:45:00","modified_gmt":"2024-01-15T18:45:00","slug":"eroding-europe-profit-forecasts-are-risk-for-stocks","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/eroding-europe-profit-forecasts-are-risk-for-stocks\/1450685\/","title":{"rendered":"Eroding Europe Profit Forecasts Are Risk For Stocks"},"content":{"rendered":"

Eroding Europe Profit Forecasts Are Risk For Stocks<\/span><\/p>\n

\n

By Heather Burke, Bloomberg markets live reporter and strategist<\/em><\/p>\n

After a\u00a0tepid start to the year, European stocks now face a tough earnings season amid a still-soft economic backdrop and a cautious consumer. \u00a0<\/p>\n

Earnings-per-share for the Stoxx 600 are expected to rise 6.5% in 2024, according to\u00a0Bloomberg Intelligence data.\u00a0Analysts have lowered consensus EPS by 2.1% in the past three months, led by materials, tech and energy. The chart below shows how profit downgrades have outpaced upgrades the past few months, even as stocks gained.<\/strong><\/p>\n

<\/a><\/p>\n

European stocks\u2019 profits partly hinge on the region\u2019s economic growth, which looks to be picking up very slowly. Economic sentiment remains\u00a0deeply negative, although improving, PMIs\u00a0have contracted, and both economists and European Central Bank members are\u00a0downbeat\u00a0about the end of 2023. Executive Board member\u00a0Isabel Schnabel\u00a0said the\u00a0near-term outlook\u00a0looks soft, even if the worst of the downturn may be over.<\/strong><\/p>\n

While euro-area headline inflation is largely easing,\u00a0margins\u00a0are at risk if price pressures continue to fall.\u00a0 And many European companies\u2019 profits depend on what\u2019s happening outside the region. The Stoxx 600 only gets about 40% of its revenue from Europe, with 20% from the Asia-Pacific, according to Goldman Sachs. And China\u2019s\u00a0economic recovery\u00a0has stumbled.<\/p>\n

The luxury sector, often considered Europe\u2019s version of high-growth tech, has emerged as a weak spot.\u00a0Burberry\u00a0dropped Friday after\u00a0cutting\u00a0its profit forecast. While some problems are company-specific, the warning underscores how luxury has underperformed amid slowing consumer demand.<\/p>\n

In November,\u00a0Richemont\u2019s CEO said\u00a0moderating demand\u00a0was to be expected; the watchmaker\u00a0reports\u00a0Jan. 18. UBS had predicted a\u00a0weak luxury earnings season\u00a0amid softer China demand. Meanwhile, Goldman Sachs cut its 2024 forecast for global\u00a0luxury growth\u00a0but sees improvement in the second half.\u00a0Earnings estimates\u00a0have fallen in the past few months and\u00a0investors\u00a0have reduced exposure.<\/p>\n

<\/a><\/p>\n

German stocks, which tilt heavily toward cyclicals such as autos and industrials, could also be set for a difficult earnings season.\u00a0DAX consensus index EPS\u00a0fell 3.3% in the past three months, especially in autos and tech.<\/p>\n

Autos look set for a challenging 2024 amid softer demand and competition in China.\u00a0German car production\u00a0is still below pre-pandemic levels;\u00a0Porsche\u00a0deliveries\u00a0fell in China in 2023.\u00a0Volkswagen plans\u00a0cost cuts\u00a0to boost returns at its underperforming namesake brand.<\/p>\n

Retail, the best-performing European sector in 2023, may have a more subdued year. While\u00a0Marks & Spencer\u2019s holiday sales beat estimates, the department store chain didn\u2019t raise its profit guidance and said the broader outlook for economic growth is \u201cuncertain,\u00a0with consumer and geopolitical risks;\u201d shares fell.\u00a0JD Sports\u00a0slashed its\u00a0profit forecast\u00a0in part on cautious consumer spending.<\/p>\n

Fresh headwinds could pressure earnings further into 2024.\u00a0Shipping disruptions\u00a0in the Red Sea may spur profit warnings from companies if the surge in\u00a0container rates\u00a0and supply-chain issues persist, according to Lazard Freres.\u00a0Tesco\u00a0said such disruptions could drive inflation on some consumer goods.<\/p>\n

To be sure, companies can easily beat a low bar. Weakness in the Chinese and European economies may already be priced in to estimates. Other issues, such as inflation and central bank interest rate cuts, could overtake earnings.<\/p>\n

But Burberry\u2019s profit warning is unlikely to be isolated as the 4Q earnings season kicks off, easily derailing European stocks\u2019 end-of-2023 rally.<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nMon, 01\/15\/2024 – 08:45<\/span><\/p>\n

\u200bRead More<\/a>\u00a0<\/p>\n

\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

Eroding Europe Profit Forecasts Are Risk For Stocks By Heather Burke, Bloomberg markets live reporter and strategist After a\u00a0tepid start to the year, European stocks…<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1450685","post","type-post","status-publish","format-standard","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1450685","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1450685"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1450685\/revisions"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1450685"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1450685"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1450685"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}