From low-cost airline Ryanair Holdings Plc to clothing and food chain Marks & Spencer Group Plc, earnings this week will reveal more about the health of the consumer-facing companies leading the charge on the Stoxx Europe 600 this year — and customers’ wallets.
Ryanair beat estimates with adjusted net income of €1.43 billion ($1.5 billion) for fiscal 2023 on Monday and predicted strong summer demand. The carrier has been among the fastest to recover from the pandemic, gaining from budget-minded passengers hunting for bargain holidays in the sun.
Results have been surprisingly resilient across most sectors this cycle, with more than two-thirds of companies beating consensus so far, according to Bloomberg Intelligence. Investors may need more convincing though, strategists at UBS Group AG say, as only companies that beat by more than 10% outperformed the market. The Stoxx 600 has dipped slightly since the reporting season got going in mid-April.
Underlying that sluggishness are concerns about recession, inflation and wage costs, even if those turn out to be exaggerated. Deutsche Bank AG analysts scrutinizing earnings calls concluded that any recession would be “modest,” and most companies have put measures in place to prepare for a slowdown.
Surveys suggest the euro-area economy will struggle because of tighter monetary policy but avoid recession as the risk of an energy crunch recedes, according to BI.
Highlights to look for this week:
Tuesday: Julius Baer’s (BAER SW) interim report before the open may give clues on how much it’s benefiting from UBS Group AG’s takeover of Credit Suisse Group AG. The Swiss wealth manager is best placed to profit from its rival’s demise, according to Citi, which made the stock a top pick among European banks this week. Julius Baer is expected to post CHF446.7 billion in assets under management at the end of the first half in June, according to estimates compiled by Bloomberg, a 5.3% increase from the end of 2022.
Wednesday: Marks & Spencer (MKS LN) may take a hit on margins to keep its grocery prices competitive, according to BI. It’s expected to post a decline in full-year pretax profit when it reports results at 7 a.m. London time, estimates compiled by Bloomberg show. M&S may look to expand in areas in which it’s underrepresented, while progress in core women’s fashion will come under scrutiny.
- SSE Plc (SSE LN), after several guidance upgrades, will be keen to keep up momentum as it aims to increase EPS by 7% to 10% in the 2023 to 2026 period. Proceeds from the sale of a 25% stake in UK power grids and tax relief of £227 million may help. SSE has scope to lift investment by 20% to 30%, supporting its renewable power expansion and long-term earnings growth, according to BI. Downside from the UK windfall levy should be contained given its power output is largely contracted. With fiscal 2022-2023 EPS guided to exceed 160p — up 68% from last year — SSE will increasingly rely on its offshore wind unit to sustain momentum as commodity prices cool.
Thursday: Generali’s (G IM) first-quarter results will be the first under the new IFRS 17 accounting standard, complicating estimates modeling. Recent reports from peers AXA SA and Allianz SE, however, led Berenberg to conclude that Generali may also surprise on the upside, with beats on solvency, non-life revenue and profit. Morgan Stanley also sees higher solvency as well as a boost for P&C, thanks to higher pricing, higher yields and lower catastrophe losses. Generali’s high exposure to central and eastern Europe, where pricing is strong, may have helped push the combined ratio below 95%.
Friday: No major earnings of note
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--With assistance from Alexander Pearson, Chloe Meley, James Cone and Maggie Shiltagh.