European-Related Earnings RevisionsApril 20, 2023
With the European Market’s earning season fully upon us, let’s look at expectations for the month ahead. According to our proprietary analytics, the European energy and real estate sectors have experienced the highest level of downward revision to sales of all sectors on both a one- and three-month basis. The same is true for these sectors for downward EPS revisions, barring one exception for three-month healthcare EPS revisions.
Sales & EPS Estimate Revisions for Current Fiscal Year – % of Companies in Group with Positive Revisions:
Output has taken a major blow with mass outages and strikes at nuclear plants and LNG facilities across the continent. State intervention in domestic energy prices also continues to suppress both earnings and revenue. With a scorching CPI number out of the UK yesterday, there is very little hope for rates to come off from either of the major central banks across the Atlantic, a factor that has and could continue to suppress real estate.
These revisions have led to changes in earnings projections into next year. Below, I show the changes in sales and EPS estimates from one and three months ago.
Change in FY1 & FY2 Sales Estimates (%) for the Current Fiscal Year:
The change in this year’s sales estimates for real estate and energy both are slightly positive compared to last month’s estimates for the same period – but then again, all sectors’ sales estimates are positive. European real estate and energy are still the two sectors with the lowest increase in estimates. When projected out to FY2, there is very little difference in their rank.
Change in FY1 & FY2 EPS Estimates (%) for the Current Fiscal Year:
When we examine the same table using EPS estimates rather than sales, the same trends exist and are notably more pronounced. Estimates for real estate and energy earnings in either FY1 or FY2 have dropped more than any other sector from last month. For FY1, only communications services EPS estimates have fallen more than these two sectors from three months ago.
What do analysts see that is dragging down forecasts for sales and earnings in these sectors? A deeper dive into the sub-industries contained within real estate and energy will give us some insight.
Change in FY1 and FY2 Sales Estimates (%) for the Current Fiscal Year – Energy and Real Estate:
Change in FY1 and FY2 EPS Estimates (%) for the Current Fiscal Year – Energy and Real Estate:
Just a quick glance at these charts will tell that the culprits are Oil & Gas Exploration/Production and Oil & Gas Equipment/Services in energy. In contrast, Oil & Gas Storage/Transportation expectations have shot up.
Real estate operating companies had some of the most negative percentage changes in sales and earnings expectations in these tables.