Off we go quarterly season. Between 21 October and 4 November approximately 70% of the market cap of the Stoxx 600 index, which groups together the largest capitalization European companies, and of the S&P 500 basket, which brings together the most capitalized US companies, will report the results of the third quarter and it will be discovered if they bearish valuations of analysts on earnings, equal to approximately -2.6% in Europe and -4.7% in the United Stateswere able to correctly capture the companies’ messages for the period.
“The climate is strong anticipationsince if the profits for the year 2024 remain stable today only 2.8% growth in Europe (compared to the peak of 4.4% in June), the consensus for 2025 still waiting about 10% of growth. If this amount of increase is quite in line with the consensus estimates for the following year at this time of the year, it is precisely with the results and guidance of the 3Q that the risk of downward revisions may arrive”, he commented Chiara Robbahead of LDI Equity of Generali Asset Management.
Europe, the auto sector is worried
In Europe, the spotlight is on automotive sector given the crisis that the sector is facing, demonstrated by the series of profit warning registered in the last few weeks. Among the consensus estimates for the 3rd quarter, the sectors in Europe in which negative earnings growth is expected compared to the 3rd quarter of 2023 are theEnergy (-20%), of Discretionary Consumption (-17%, mainly the automotive sector), and the sector Technological (-13%). The Chemists and Industrialists, also on the basis of more favorable comparison bases, are expected to report the best growth in profits (22% and 17% respectively)”, underlined Robba.
USA, Tech still leads
In the United States it will still be the sector Techaccording to analysts, to have the better earnings growth in the third quarter, equal to 19% yoy, while the worst sector it should be that ofEnergy (-25% profit growth).
“In this geographic area, we expect a better balance between cyclicals and defensivesi, thanks to a progressive effect of improvement in the performance of the sectors that make up the S&P beyond the technology sector, the so-called “broadening” of the market which should continue also in 2025″, explained the Generali Investments analyst. “This year’s third quarter earnings season takes place in the context oflast phase of the electoral campaign for the presidential elections in the United States. This event takes on particular relevance for Europe, considering that a possible election of Donald Trump and a consequent one tariff policy they could negatively impact the profits of European exporting companies,” he noted. “At the same time, support could come from China’s recovery in 2025, if the recently announced economic support programs start to have an effect,” he added.
The position of Generali Asset Management
Generali AM analyst therefore suggests “prudence”. “We maintain a well diversified portfolio between cyclicals and defensives and between the cheaper value component and the growth component which in some cases is already discounting the recovery. In the medium term, in a context of moderate economic growth and contained inflation, and in the event that the Q3 results do not lead to negative earnings revisions, we think that the future rate cuts expected by Central Banks can lead to ato moderate expansion of multiples and then a further one market upside“, he concluded.
