European companies have presented their most disappointing financial statements for the last three years after economic stagnation, and rising costs have had a negative impact on profits. All this is another blow to investor confidence, which is already shocked by the budget crisis of Italy, and analysts Brexitu, Reuters.
The stocks are experiencing sharp fluctuations on the days on which the reports are published, as companies report damages to which they suffer due to higher tariffs and weaker global demand for stock market auctions and increasing volatility.
Some of the largest companies in Europe, from cement and vehicle manufacturers, by engineering companies and airlines, warn of lower margins.
This reporting season in Europe is the weakest since the fourth quarter of 2015, According to data from I / B / E / S Refinitiv.
Many investors hoped that a stable reporting season would help compensate for political and macroeconomic weaknesses in the region – from the drama that accompanies the Italian budget, to Brexit. The Pan-European index STOXX 600 is going to send the worst year since 2011.
In addition, analysts have significantly lowered their company earnings forecasts, part of benchmark STOXX 600, at the fastest pace since July 2016. The discount started even three weeks before the start of the reporting season, indicating that confidence has already been done low.
"The biggest reason that the reporting season in the third quarter was weaker than usual is the lack of very good results, which was a more serious problem than the wider than usual discrepancies between expectations and data," commented analysts from Morgan Stanley.
It is expected that revenues from STOXX 600 will increase by 15.8% in the third quarter compared to the same period last year, with an increase of 8.4% in the entire 2018. For comparison, last year's financial results of the largest public companies in Europe increased by 12.2%.
This season, companies are trying to meet the higher costs of raw materials, and the prices of fuels and wages are rising. At the same time, the obligations exert additional inflationary pressure on some companies.
The examples are numerous
LafargeHolcim, the largest producer of cement, lowered its expectations regarding profits due to the rising costs of fuel and transport.
Slowing growth and higher costs also have a negative impact on the automotive sector, and European companies rely on growth in China – the world's largest automotive market.
Car makers, including Daimler and BMW, have reduced their expectations of profits due to trade responsibilities and the slowdown in Chinese demand.
Negative surprises in this quarter also come from automotive parts suppliers, including Michelin, Nokian and Valeo, suffer from a slowdown in sales growth.