July 30, 2018

STOXX 600 Earnings Roundup – Week ending July 27, 2018

by Tajinder Dhillon.

18Q2 earnings season is underway with 84 companies reporting last week ending July 27, 2018.  Exhibit 1 provides a summary of reporting results.

Exhibit 1: Earnings Season Results

Overall Recap

Of the companies that reported this week, 44% beat EPS expectations and 37% missed EPS expectations.  In addition, 57% beat Revenue expectations and 40% missed Revenue expectations.

The company who beat EPS expectations by the largest amount was Banco de Sabadell SA (SABE.MC) with a positive 257.1% surprise.  The company who missed EPS expectations by the largest amount was Saipem SpA (SPMI.MI) with a negative -130.6% surprise.

The company who beat Revenue expectations by the largest amount was Subsea 7 SA (SUBC.OL) with a positive 13.8 surprise.  The company who missed Revenue expectations by the largest amount was EDP Energias de Portugal SA (EDP.LS) with a negative -34.1% surprise.

European Financials Recap

UBS Group AG (UBSG.S) kicked off European Financials to a good start, posting both a positive EPS and Revenue surprise.  UBS saw strong growth in Global Wealth Management which led to a segment profit of CHF 2.2 billion, the highest in 10 years.  Investment Banking also was strong across the board, which broke new ground with its transformation to a client-focused and capital-efficient model.

Deutsche Bank AG (DBKGn.DE) posted an impressive 80% positive EPS surprise this quarter alongside an 8% YoY EPS growth rate.  Incoming CEO Christian Sewing is laser-focused on shareholder return and being agile to invest in attractive growth opportunities.  “This was a quarter of unprecedented change within our bank and not for the sake of change, but change to rebuild our bank for focus and growth … we need to keep the discipline and the momentum; and reducing leverage exposure, and this is ahead of plan … this is what you can expect from this management team: we set targets and we execute on them.”

Banco Santander SA (SAN.MC) was one of the major banks to miss earnings this quarter due to a more volatile political market in conjunction with possible trade war impacts.  CEO José Antonio Álvarez Álvarez mentioned, “we developed the business in an environment that has been for sure more volatile than in the previous quarters, mainly due to political reasons … and probably the most important thing that is going on in the environment is the discussions about trade, global trade, that the potential introduction of barriers has the highest potential impact to affect the markets.”

Exhibit 2 looks at the YTD performance of European Banks, which are on aggregate significantly underperforming the wider benchmark by almost 10%.

Anheuser Busch InBev NV: This One’s for You

AB InBev (ABI.BR) saw a 0.6% revenue growth rate which was helped by its sponsorship of the 2018 FIFA World Cup.  “We saw beer volume growth of 0.9%, with especially strong performances in Mexico, China and Western Europe and the benefits around the world of our global sponsorship of the FIFA World Cup. Budweiser led the digital space as a global beer sponsor of the tournament coming in ahead of all other brands and becoming the most talked about brand globally … this exceeded our expectations and enabled us to make the most of our global sponsorship by reaching more consumers and building awareness of our brands. We look forward to continuing this momentum.” according to CEO Carlos Alves de Brito.  This also lead to Budweiser delivering 10% revenue growth outside of the U.S.

“Our global and premium brands are leading the way across the continent, especially in the U.K. where we saw double-digit volume and revenue growth.”

Stella Artois and Corona were also star performers with 9% and 20% revenue growth.

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