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.
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.