• Roche, Adidas and BNP Paribas have disappointed on profit
  • Only 45% of Stoxx 600 firms have so far exceeded estimates

The earnings season in Europe is off to one of the worst starts, with JPMorgan Chase & Co. data showing the fewest companies beating estimates in records going back 15 years.

Among Stoxx 600 firms that have reported so far, only 45% topped projections. It’s a far cry from the 79% rate coming from corporate America. Strategists say the results are especially dismal considering that analysts slashed their projections ahead of the season and a lowered bar should usually be easy to beat.

“Many of the large European economies, above all Germany, are simply in a very difficult situation,” said Tatjana Puhan, chief investment officer at Copernicus Wealth Management. “That makes it difficult for companies to grow and to be profitable.”

To be sure, it’s early in the season and trends may change. Only a fifth of the Stoxx 600 has reported at this point. However, with European stock markets just shy of hitting a record, it’s a reason for investors to be worried about whether prices can keep heading higher.

BNP Paribas SA, Adidas AG and Roche AG have all issued warnings about profits this year.

JPMorgan equity strategist Mislav Matejka said only four of the 10 main industries have seen positive sales growth so far. As a whole, European earnings growth has fallen 4% since last year and negatively surprised by 1%, he added.

Commodity companies are the biggest drag to overall earnings growth, JPMorgan analysis shows, with many oil and mining companies wrestling with slumping demand from China.

Industrials and consumer discretionary companies also stand out because more than 80% have missed estimates, according to Bloomberg Intelligence earnings tracker. In contrast, telecoms and technology are mostly beating forecasts.

Morgan Stanley also said their early data shows the earnings season is raising red flags. In particular, they point to data that tracks the breadth of analysts earnings estimates, which shows the weakest start for any quarter since 2020.

In their view, the revisions will trough by the spring and then begin to recover into the second half of the year.

Written by:  — With assistance from Kit Rees, Michael Msika, and Lisa Pham @Bloomberg

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