LONDON- As Europe’s third quarter reporting season kicks into gear, investors are scrutinizing company results for any signs that supply chain strains, labor shortages and surging energy prices are starting to undermine profits.
Confidence in Europe’s earnings resilience has helped the continent’s bourses recover from a wobble in September with the latest Refinitiv I/B/E/S data showing third quarter profits for the 600 biggest listed European companies are expected to grow 46.7 percent from the same period in 2020.
However, while earnings upgrades have consistently outnumbered downgrades since October last year, the weekly ratio between the two has dropped to 1.8 from a 17-year high of 26.3 in August.
Earnings revisionsArnaud Bauduin, fund manager at Ofi AM in Paris, says there has been a shift in sentiment linked to inflation, which hit a 13-year high in the euro zone last month.
“We are suffering from the tail effects of COVID. The economy is not fluid and this is why we have all those problems in supply chains and then inflation,” he said.
“When you look at companies, the strong momentum that we’ve seen in the last 12 months is starting to fade.”
On Monday, the chief executive of Dutch health technology company Philips blamed “chips and ships” as it cut its financial outlook with a shortage of electronic components and a lack of shipping containers hampering production and delivery. read more
Shares in Belgium’s Umicore also fell after the catalytic converter maker cut its 2021 core profit outlook due to the chip shortages. read more
