European Q4 2015 earnings: Economies are from Venus, markets are from MarsContributors Alex Dryden, Global Markets Insights Strategy Team
- With 85% of companies in the Euro Stoxx 600 having reported (as of 16 March 2016), we estimate that European fourth-quarter 2015 earnings per share (EPS) declined by 5.9% year on year (y/y).
- As has been the case in recent quarters, the headline number is badly distorted by the sharp falls in the energy market. Excluding energy, Stoxx 600 EPS actually grew by 1.2% (y/y).
- Another unwelcome feature is the disconnect between equity returns and the performance of the domestic economy. Regional equities are 1% lower than where they were at the end of December 2014 even though the eurozone economy grew by 1.5% in 2015.
European fourth-quarter earnings
Overall, we estimate fourth-quarter earnings growth to be -5.9% (y/y) for the Stoxx 600 (Exhibit 1). As has been the case in the last few earnings seasons, the headline number is distorted by the large falls in the energy sector. Excluding energy, Stoxx 600 EPS growth is currently 1.2% (y/y). The core of the eurozone continues to show improvement, with eurozone ex-energy EPS registering an 11.0% y/y increase.
The economic recovery in Europe is beginning to help out more cyclically orientated sectors, such as industrials and consumer discretionary
Exhibit 1: STOXX 600 EPS GROWTH BY SECTOR
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