Croesus/The Investor's View:After the rollercoaster ride in stock markets over the summer, this week marks a welcome return to basics as company earnings reports are scheduled to come through thick and fast.

Croesus has been looking at the quarter-to-date share price movements in the Irish market and is a little surprised to find that financial stocks have held up reasonably well during July and August.

Admittedly, the banks had underperformed the overall market during the first half of 2007, so the further falls in July and August were limited by the fact that the stocks were already looking cheap on valuation grounds.

For example, at a share price of €19, AIB's estimated 2007 price/earnings ratio is nine and its price/net asset value ratio is 1.8.

The construction-related stocks performed much worse than the financials in July and August, exemplified by the 17 per cent decline in the share price of market bellwether CRH up to its first-half results release on Tuesday.

CRH rarely fails to meet market expectations and the first half of 2007 was no exception. First-half profit before tax rose by 27.3 per cent to €670 million, which was about 2 per cent ahead of brokers' forecasts.

CRH's well-balanced geographical and product diversity came strongly to the fore in these results. The summer sell-off in its share price was driven mainly by negative sentiment regarding its US businesses and to a lesser extent the slowdown in the Irish housing market.

In fact, operating profit in the Americas did decline, but only by 2.4 per cent to €276 million, representing 36 per cent of overall profits. This was quite a modest decline and reflects the fact that CRH's American business is much more heavily exposed to non-residential activities, such as road-building, than it is to the very weak US residential sector.

Therefore, the group's product and geographical spread in the US should enable it to continue to weather the storm with only a modest dent in profits.

In contrast, CRH's European operations stormed ahead, with operating profits rising by 50 per cent to €495 million, representing 64 per cent of group profits. Growth was broadly based, with activity across Europe generally strong.

CRH's European operations benefited from the improving gross domestic product growth across Europe and favourable weather conditions in the first half of the year. Poland was particularly strong, with 40 per cent growth in materials (cement and aggregates) volumes. Portugal was one of the few weak spots in Europe.

During the first half of 2007, the company maintained its active acquisition strategy when it spent close to €1 billion on more than 30 transactions. Purchases included the publicly-quoted Swiss builder's merchant, Gétaz Romang, and CRH's first transactions in China and Turkey.

Of its big 2006 US deals, Apac is performing ahead of expectations while MMI's performance was disappointing.

An exceptionally healthy balance sheet, combined with the generation of strong free cashflow, puts CRH in position to continue to expand through acquisition. Furthermore, this ongoing acquisition spend is compatible with the board's strategy of reducing the dividend cover ratio.

The interim dividend was increased by 48 per cent to 20 cent per share, which is in line with CRH's stated strategy of reducing dividend cover to 3.5 times (dividend cover equals after-tax profits divided by the cost of the dividend).

In 2005, dividend cover was 4.8 times, and in March 2007 the board said it would reduce cover to a targeted 3.5 times for 2008. Barring unforeseen circumstances, this points to dividend growth of about 25 per cent in 2007 and 2008.

Given current economic and financial market uncertainties, the outlook statement takes on greater significance.

The overall tone of this statement was positive, with "strong full-year profit growth expected". In Ireland, good activity levels in non-residential and infrastructure sectors are expected to continue to compensate for the decline in residential construction.

Poland and Ukraine remain very busy, and management anticipates further strong profit growth in both countries in coming months. Overall for Europe, "first-half organic profit growth was already ahead of that achieved for the full year in 2006, and we look to further progress in the second half of the year augmented by good contributions from acquisitions".

For the Americas, management expect that full-year profits will be similar to the levels achieved in 2006.

With earnings growth seemingly well underpinned for 2007 and 2008, the shares look significantly undervalued on a price/earnings ratio of 12.

In current volatile market conditions, the share price could be dragged lower, which would present canny investors with a buying opportunity.