THE EURO zone economy may appear to be recovering faster than those of the US and the UK, but its companies are underperforming their British and American rivals.
Companies from the euro zone are the only ones, among the three regions, where there have been more disappointments than positive surprises in the ongoing second-quarter results season,according to analysts at Dutch bank ING.
Leading the way – in contrast to the economic growth figures – are German companies, with more than a third releasing results that were worse than analysts’ expectations and fewer than one in 10 beating forecasts.
The year-on-year performance of both US and European companies is so dismal that analysts are looking at other measures to see whether the worst has been reached.
ING measures whether a company beat or missed analysts’ forecasts by more than 5 per cent – to avoid businesses that try to manage expectations.
In the euro zone, 26 per cent of companies have missed expectations, whereas only 18 per cent have exceeded them.
But in the US and the UK, 23 per cent and 24 per cent respectively have surprised positively, while only 19 per cent and 21 per cent have disappointed.
The performance of companies seems to be the opposite of the economies after the 16-nation euro zone gross domestic product shrank 0.1 per cent in the second quarter, while the US and UK economies fell by 0.3 per cent and 0.8 per cent, respectively, on a quarterly basis.
France and Germany recorded positive growth of 0.3 per cent.
Gareth Williams, equity strategist at ING, said that part of the weak euro zone corporate showing could be explained by the underperformance of financial companies compared with their US and UK rivals. However he added: “Maybe the results are also a reason to be slightly sceptical of the recovery that we have seen in France and Germany. The difference [between economies and companies] is quite striking.”
The best corporate performers were Swedish companies, with half beating expectations and only one in seven missing them.
Few other European countries stood out apart from the Netherlands and Norway, both of which had 10 per cent more companies underperforming than exceeding expectations.
The spread among sectors in Europe was also uneven with the chemicals industry performing worst, followed by oil and gas and general industrials. The sectors that surprised most positively were media, banks, consumer goods and retail.
