S&P Capital IQ has today released its Q2 2014 European Consensus Earnings Report. The report highlights that, as the second quarter earnings season gets underway, S&P Capital IQ observes an improving sentiment in Europe, as reflected by the positive earnings per share (EPS) outlook for the S&P Europe 350.
According to S&P Capital IQ, there appears to be a renewed anticipation of growth following a more stable outlook on interest rate changes from both the European Central Bank and the Bank of England. On 10 June 2014, the S&P Europe 350 hit its 10 year high with analysts predicting a revival in M&A activity, and across Europe indices have recorded strong YTD performance.
Key observations in the report (attached) include:
- The blended year-on-year growth in quarterly earnings for the S&P Europe 350 has improved by five percentage points since April 2014 to +7.1% as of 27 June 2014. This stands in stark contrast to the negative outlook in the first quarter
- Most noteworthy improvement in sentiment appears in the Telecommunication Services sector, as Telefonica’s takeover of E-Plus is expected to lead the way for a broader consolidation in the industry
- Sectors that contradict the positive growth trend include Utilities, Healthcare and Consumer Staples. European Utilities continue to be the worst performing sector as a shift to renewables and low wholesale power prices are expected to continue eroding their revenues
- The top five companies by potential upside today (27 June 2014 versus three months ago) Banco Espírito Santo, S.A.; Barclays PLC, Cairn Energy plc, Deutsche Bank AG, and Alcatel-Lucent. The bottom five companies by potential upside today (27 June 2014 versus three months ago) are Belgacom SA; Banco de Sabadell, S.A., Provident Financial plc, Fortum Oyj, and Acciona, S.A.