Earnings Watch: Can Daimler break the negative sentiment on autos?
Head of Equity Strategy
Summary: The Q4 earnings season continues at high speed this week with around 340 companies reporting earnings out of the 2,000 companies we track during the period.
Moving to Europe, the initial picture was grim with negative earnings growth. However, as the earnings season progresses, STOXX 600 companies have delivered more upbeat numbers and the aggregate number is now showing positive earnings growth.
Google’s parent company reports Q4 earnings today (after-market) with analysts expecting EPS $13.04 down 6% y/y and revenue of $31.3bn up 21% y/y. Alphabet continues to deliver +20% growth but we do expect the story to increasingly be about margin compression and investors seeking clarity of when new businesses will deliver meaningful growth to the overall business. There are high expectations for Waymo (self-driving automobile service) but these could prove to be too optimistic. In the short term investors are more excited about YouTube as Alphabet is just beginning to tap into this asset in terms of generating profits.
With Walt Disney having announced its intention to move into the video streaming industry, the company FY19 Q1 (Q4 calendar period) numbers are very highly anticipated and expected to come out on Tuesday (after-market). Analysts are expecting EPS €1.56 down 18% y/y and revenue of $15.1bn down 2% y/y. While Walt Disney has likely experienced a significant slowdown in the last quarter all eyes are on the Fox acquisition/integration (including selling Fox’s decision to tender its $15bn Sky shares and the DoJ’s requirement of Walt Disney to sell its 22 regional sports networks) and more news on the upcoming Disney Plus direct-to-consumer streaming product in the second-half. Especially Disney Plus plans are something that can move the shares over the earnings release as investors are seeing this product as the key to unlock high growth rates for the company’s content library globally.
The global automobile industry has been in disarray during 2018 with declining global demand and especially in China and Europe. On top of that investment needs for self-driving technology and transition to EV technology have reduced profitability. Daimler has not escaped this and when the company reports Q4 numbers on Wednesday analysts are expecting EPS of €1.54 down 51% y/y and revenue of €45.8bn up 5% y/y. Investors will come into the earnings release with low expectations and a challenging year for Daimler with the Mercedes brand under pressure in all key markets on top of rising costs and uncertain environment due to the US-China trade conflict.
The table below shows the most important earnings this week.
Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.