Upcoming week of European earnings to shed light on spending power
First-half results from the French firm behind Moët champagne and Louis Vuitton should show gains from China’s reopening and a recovery in travel retail, factors that may help to offset a slowdown in the US. Picture: Dan Kitwood/Getty
Several European companies ranging from drug makers to luxury retailers are expected to post quarterly earnings this week, revealing much about pricing and spending power as inflation cools and interest rates move closer to a peak.
Kicking off the week, Julius Baer’s first-half report before the Swiss open should reveal a surge in inflows as the wealth manager gained from Credit Suisse Group’s demise. Net new money is expected to come in at 6.5bn Swiss francs (€6.7bn) for the first six months compared with outflows of 1.1bn francs the year before, consensus shows.
Also on Monday, a Ryanair update is expected to show the budget airline benefited from an expanded fleet, strong demand, and more stable costs in its fiscal first quarter. That said, air traffic control and pilot strikes, as well as potential delays in Boeing deliveries, present challenges that could negatively impact the outlook. Passenger numbers probably grew 10% in the quarter, 25% above pre-covid levels, consensus shows.
On Tuesday, first-half results from the French firm behind Moët champagne and Louis Vuitton should show gains from China’s reopening and a recovery in travel retail, factors that may help to offset a slowdown in the US. LVMH demand was probably robust across Asia, also in Japan, and stronger pricing power may have bolstered margins. Anticipated low net debt leaves room for deals.
On the same day, Unilever’s organic sales growth may have topped 8% in the first half, driven by higher prices, helping it to achieve at least the upper end of its guided range of 3%-5% for 2023. All eyes will be on new chief executive Hein Schumacher’s initial views after taking the helm this month.
On Wednesday, Deutsche Bank should have benefited from higher interest rates, supporting higher year-on-year revenue growth at its corporate and private banks in the second quarter. That should boost second-quarter net revenue, which is expected to grow 7%. Management has already warned of a possible 20% drop in fixed-income trading for the period.
On Thursday, Gucci parent company Kering and cosmetics firm L’Oreal are expected to report after market. Kering is taking steps to turn around the embattled Gucci brand, with the impending departure of its head Marco Bizzarri in September. Organic growth at the brand is expected to reach 4.2% in the second quarter, up from 1% in the first.
Meanwhile, L’Oreal could look to online ad spending in China to lift cosmetics sales at physical stores this year. The group’s organic growth is expected to soften to 11.7% from 13% from January to March.
In the same day, Nestle’s results may show a second-quarter slowdown, but growth in the first half should still land squarely within the company’s 6%-8% target for the year. Still, fragile consumer confidence could push people toward cheaper brands, making the guidance more challenging in the second half.
On Friday, pharma giant AstraZeneca’s second-quarter results may get a $712m (€639m) boost following the simplification of a royalty contract with Sanofi and Sobi. While that should help to counterbalance stiff year-earlier comparisons, the company may hold off on a guidance adjustment until it gets a better reading of full research and development spend, which probably increased last quarter.
These updates follow a disappointing week for tech amid an ongoing slowdown in the sector.
The Nasdaq 100 shed 0.3%, deepening losses from Thursday when technology groups fell on the backs of lower-than-expected sales at Netflix and an adjusted earnings miss at Tesla.
Meanwhile, Google parent company Alphabet and Exxon Mobil gained while Facebook owner Meta fell ahead of the groups’ earnings expected this week.
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