Interactive Investor

Winners and losers in Q2 results season so far

31st July 2017 13:40

Graeme Evans from interactive investor

When a quarter of the FTSE 100 index reports results on one day - as happened last Thursday - it can be hard to get a handle on the bigger picture and trends.

It certainly feels like it's been positive earnings season so far, with quite a few upgrades and only one or two major disappointments springing to mind. But has it been a blistering quarter?

Not according to the equity strategy team at Barclays, who have studied the results of 285 companies - accounting for up to 60% of European market cap - up until last Friday (28 July).

Compared to the record-breaking first-quarter earnings season, the Barclays team said Q2 results were underwhelming.

The median company in the research beat sales and earnings per share (EPS) estimates by 53 basis points and 244 basis points respectively, marking the third consecutive quarter of sales beats.

But the share price performance of the median stock has only been in line with the market on results day, as those that have missed estimates have been punished more severely by investors than in previous quarters.

The note from Barclays said that analyst consensus has started trimming EPS estimates, with the earnings revisions ratio now creeping into negative territory, suggesting a loss of momentum.

The scale of the cuts to EPS, however, has been modest. The consensus forecast is now for 12% growth in 2017, versus 13% prior to the earnings season. This compared with the current year-on-year run rate of 15%.

Against lowered estimates, the European earnings scorecard found the energy sector beat numbers, with telecoms, media, technology and insurance companies also outperforming on results day.

Banks, whilst beating estimates, succumbed to profit taking, and capital goods stocks were severely punished for not beating numbers.

At a regional level, stocks in the UK, France and Netherlands performed well, with 21 of 34 companies in the UK beating EPS consensus. Across Europe, mid-cap companies surprised more than their small- and large-cap companies, the research note added.

 

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.