Fersa confirms process to seek investors; no firm deals to date
Fersa, the listed Spanish renewable-energy company, made the following announcement further to press reports over the weekend about a possible sale of the company.
The Board of Directors of the Company granted, at the time, a mandate to Lazard in relation to the reconfiguration of its shareholding structure, in order to seek and select potential investors interested in taking part in this process.
To date, the company has selected a small number of groups interested in taking part in the process. Fersa has received only and the board of directors has not ruled on the offers received.
The process continues and, if relevant developments occurred, Fersa will inform the markets.
In relation to press reports, Fersa states that the company has not reached any agreements about a public offering of acquisition of shares.
It was reported over the weekend that Fersa had attracted final offers from the fund Springwater, the Spanish electricity trader Audax and the PE firm Oaktree. The report said that the Swiss-based Springwater is bidding in alliance with Texas Pacific Group (TPG) and that other potential suitors include Abac, Cerberus and First Reserve.
Fersa has a market capitalisation of EUR 55.3m
Goldman Sachs Research
Strategy Espresso: Earnings and target downgrades support more Fat & Flat
· We cut our top-down 2016 EPS growth estimate to -2% from 4% and raise our 2017 estimate to 15% from 10%.
· Our 2016 EPS downgrade is a function of a weaker global outlook, a stronger euro, lower inflation and commodity prices.
· Given our EPS growth adjustment, we lower our 3-, 6- and 12-month price targets for the STOXX Europe 600 to 335, 340 and 345; for the EURO STOXX 50 to 2970, 3020 and 3070. Our 12-month target for the FTSE 100 is lowered to 6300 from 6550.
· Our 12-month targets imply a 4% price return and 7.9% total return for the STOXX Europe 600, 4.5% and 8.7% for the EURO STOXX 50, 3.1% and 7.3% for the FTSE 100.
· A 7.9% total return is low from a risk-adjusted perspective, once the volatility of the equity market will have been factored in. In addition, our 6-month target of 340 for end 2016 represents a -7% decline YTD. We continue to view the prospect of a flat and flat environment.
We cut our 2016 earnings forecasts for the STOXX Europe 600 to -2% from 4%.
Source: Goldman Sachs Global Investment Research.
Earnings growth estimates
We cut our 2016 EPS growth estimate to -2% from 4% and raise our 2017 estimate to 15% from 10%. Our 2016 EPS downgrade is a function of (i) a weaker global outlook, (ii) a more Dovish Fed (stronger euro, lower risk-free rate) and (iii) weaker commodity prices than we forecast.
· (i) In January, the China slowdown and tightening of US and European financial conditions contributed to the downward revision of the GDP of European companies’ main trading partners. Our economists now expect the GDP of the Euro area to grow 1.4% in 2016 against 1.7% in January.
· (ii) Monetary policy divergence has not materialised as we expected and the macro backdrop of a more Dovish Fed worried by the global outlook and sinking commodity prices pushed out expectations of US interest rate rise. Consequently, the US dollar weakened and the euro appreciated 6% since the beginning of the year. Lower interest rates for longer also contributed to the compression of net income margins for banks and insurance companies, which account for 27%* of the STOXX Europe 600. We now see flat earnings for Financials in 2016 (0%) compared with 9% previously.
· (iii) Even though the Brent oil price has recently recovered from its drop to $27.9/bbl in January, the average price since the beginning of the year exceeds $37/bbl, which is lower than we anticipated. Commodities stocks are only 8%* of the STOXX Europe 600 but they have seen sharp downward revisions to their 2016 earnings estimates (-33% YTD), which dragged down the overall market estimate (-9%). We now expect earnings to slump 43% in 2016, compared with -28% previously.
We raise our 2017 EPS growth estimate from 10% to 15% as we expect Financials (30% of the SXXP*) to recover, benefiting from rising inflation and interest rates. Additionally, we expect commodities stocks to ‘rise from their ashes’ with earnings growing 89%. That said, these companies should not represent more than 8%* of the index in 2016.
This 'recovery' in 2017 is small in a historical context (see chart below) and the end 2017 EPS level that we forecast (24.7) is now below our previous forecast (25.9). We do not expect earnings to get close to the 2007 peak before 2018.
* Weights based on 2015 earnings.
European earnings have been falling since 2011, aside from 2014. The earnings growth we forecast in 2017 is small in a historical context.
Annual STOXX Europe 600 earnings growth.
Source: I/B/E/S via Datastream, Goldman Sachs Global Investment Research.
EPS have not recovered since the Global Financial Crisis, dragged down by Financials. We forecast European earnings to get close to the 2007 peak in 2018.
Quarterly trailing EPS for the STOXX Europe 600.
Source: Datastream, Goldman Sachs Global Investment Research.
Target prices
Given our EPS growth adjustment, we lower our 3-, 6- and 12-month price targets for the STOXX Europe 600 to 335, 340 and 345 (from 355, 360 and 380). We also adjust our 3-, 6- and 12-month forecasts for the EURO STOXX 50 to 2970, 3020 and 3070 (from 3200, 3250 and 3500). This implies slightly higher returns than for the STOXX Europe 600 given the Euro STOXX 50 has a higher beta. We expect this beta to slightly rise from the end of the year, with markets anticipating a rebound in Commodities and Financials in 2017.
We keep our 3 and 6-month targets unchanged for the FTSE 100, which is the best performing of the major European indices (in local currency) year-to-date. However, we lower our 12-month target to 6300 from 6550, which implies a 3.1% price return and a 7.3% total return.
We revise down our 3-, 6- and 12-month target prices for the STOXX Europe 600 and the EURO STOXX 50.
European indices expected price level, price return and total return.
Source: Goldman Sachs Global Investment Research.
MergerMarket
China state-owned entity Chemchina is planning to shortly meet with PRC banks to request commitments towards a USD 12.5bn China CITIC Bank-led loan that forms part of the financing for its CHF 41.79bn (USD 43bn) acquisition of Swiss agrochemicals firm Syngenta [VTX: SYNN], a source briefed on the situation said.
Bank commitments for the loan were supposedly due at the end of April, but that deadline has been moved several times now, the source said.
While Chemchina’s offer of CHF 465 per share plus a CHF 5 special dividend is fully financed and has committed financing, the SOE has said that all or parts of its existing credit facilities may be replaced by equity funds from the company itself and one or several third parties.
Chinese lenders China Construction Bank, Export-Import Bank of China, Agricultural Bank of China, and Industrial and Commercial Bank of China have themselves hesitated to help underwrite the USD 12.5bn CITIC loan for reasons that are still unclear, it was said. This has triggered some uncertainty among the international banks that were set to participate as well.
A banker following the deal has heard of “chopping and changing” amongst the Chinese lenders. The banker speculated that the four banks could be posturing because of CITIC’s relative lack of experience in financing deals of this magnitude. It could be a loss of face for the four major Chinese banks to line up behind CITIC, which they might see as a “second tier” lender.
Eight banks are expected to take some USD 1.5bn each of the USD 12.5bn loan, it was said. CITIC has committed to provide USD 3bn in case commitments don’t reach the desired level.
It is unclear how successful it would be to put pressure on the banks, especially in an environment where China’s bad debts are increasingly coming to light, the first source said. Ratings firm Moody’s revised its outlook for China’s credit rating to negative from stable in March this year, saying the government’s finances may come under pressure if it shoulders the liabilities of distressed state-owned enterprises. The agency doubled-down on its assessment in April, noting that the government hasn’t addressed structural challenges coming from high corporate debt levels.
Neither the source nor the banker thought the struggle to get commitments would break the deal, which is seen as being endorsed by the Chinese government.
The deal is strategic enough to China that the government could put pressure on lenders to support it, one of the sources said. The source believed the Chinese banks would eventually capitulate and support the deal if they receive pressure from the central government. The acquisition of Syngenta by a centrally-controlled SOE is a strategic deal for China, which is seeking food security and wants to modernise its agriculture industry.
As reported, Chemchina is putting together USD 50bn in total financing for a 100% takeover of Syngenta. CITIC is coordinating a USD 12.5bn loan backed by Chemchina’s assets, while HSBC has put together USD 12.5bn against Syngenta assets. The remaining USD 25bn will be equity mostly from Chinese government vehicles.
The parties expect the deal to close by the end of this year, following receipt of all regulatory approvals. The transaction is subject to antitrust clearance from the EC, HSR (US), CADE (Brazil), and CCI (India) and also needs a green light from the Committee of Foreign Investment in the US (CFIUS). It has already received approval from China’s antitrust authority (MOFCOM).
The Swiss public tender offer opened on 23 March for an initial period of 40 trading days. It may be extended once or several times for subsequent periods of up to 40 trading days pending satisfaction of all offer conditions, including all regulatory approvals.
Chemchina declined to comment. CITIC did not respond to a request for comment.
Wall Street : blagues sexistes, discrimination et grossesses cachées, quand la réalité dépasse la fiction
Opening Belle, le livre événement de Maureen Sherry, ex-trader new-yorkaise qui a brisé l’omerta sera bientôt porté à l’écran. Plongée dans le monde de la finance, opaque et à forte teneur en testostérone.
Pour son premier jour de travail à Wall Street, ses confrères avaient fait preuve à son égard d’une très délicate attention en remplaçant les rondelles de pepperoni de sa pizza par… des préservatifs, sortis de leur emballage. Maureen Sherry avoue : « Je me suis empourprée, mais j’ai survécu. »
Pendant les onze ans qu’elle a passés chez Bear Stearns, alors l’une des banques d’affaires les plus en vue de Wall Street avant sa faillite retentissante en 2008, cette élégante blonde a composé quotidiennement avec un cocktail de blagues salaces et autres anecdotes aussi obscènes que déplacées. Une triste illustration des limites auxquelles les femmes sont confrontées régulièrement au pays du machisme ordinaire, et qui, trop souvent, les privent d’une carrière analogue à celle de leurs homologues masculins. « À l’évidence, je ne travaillais pas dans une sorte d’amicale féminine où l’entraide et la compassion étaient de mise. Non seulement on ne se soutenait pas entre femmes, mais on préférait faire le dos rond et endurer plutôt que faire des vagues, se souvient Maureen Sherry. On faisait partie d’une équipe. Et comme les membres d’une famille dysfonctionelle, on préférait garder nos petits secrets pour nous. » De cette navrante expérience, elle a écrit une fiction : Opening Belle (éd. Simon & Schuster, 2016, non traduit en français.) Plutôt qu’un réquisitoire féministe, Maureen Sherry a choisi de partager son histoire sur un mode romancé et humoristique, dans un genre chick lit, « pour toucher le plus de monde ».
Chronique d’un machisme ordinaire
C’est finalement une jeune candidate pour un poste sur le trading floor (salle des marchés, NDLR) qui, involontairement, raconte Maureen, a commencé à dénouer la cotte de mailles que la banquière s’était soigneusement tissée toutes ces années. « Lorsque, à la fin de l’entretien, elle m’a demandé comment étaient traitées les femmes dans cet environnement, non seulement j’ai botté en touche avec une boutade, mais je ne l’ai pas mise en garde », poursuit-elle.
Maureen ne l’a pas avertie du fait qu’elle devrait éviter d’être trop sexy, qu’elle devrait cacher ses grossesses le plus longtemps possible, voire qu’il était plus prudent de ne pas mentionner le fait d’être mariée, qu’il ne fallait jamais, ô grand jamais, pleurer ou s’émouvoir publiquement d’un dessin d’enfant. Que, que, que… Pour la cohésion de l’équipe, cette diplômée de l’université de Cornell a passé sous silence que les CV féminins étaient annotés de considérations sur le physique des postulantes. Elle a omis de raconter que de retour de congé de maternité, non contente de trouver son bureau et sa fonction occupés par un autre, ses collègues masculins meuglaient sur son passage lorsqu’elle allait à l’infirmerie tirer son lait, et que l’un d’eux avait jugé désopilant de boire le lait qu’elle avait stocké dans le réfrigérateur du bureau.
Harcèlement ? « Nous avions à l’époque (les années 1990, NDLR) probablement moins de modèles auxquels nous identifier, mais je pense surtout, sincèrement, que pour la plupart, ils avaient l’impression de nous inclure dans leurs blagues potaches. » Des bataillons de femmes dans la finance, comme invisibles dans cet environnement au taux de testostérone élevé, ont ainsi, par esprit de corps, préféré encaisser. Une situation d’autant plus cruelle qu’à New York, en particulier, avoir une épouse qui ne travaille pas est un signe extérieur de richesse.
Le formulaire U4, l’arme fatale
« Il faut avoir la peau aussi dure que celle d’un vieux crocodile », confiait récemment Christine Lagarde, directrice générale du Fonds monétaire international, au sujet des femmes évoluant dans un environnement masculin, surtout si l’on s’approche du haut de la pyramide. Les banques ont, en effet, plusieurs armes efficaces pour faire régner l’omerta. La première est le U4 : un document que chaque jeune recrue signe à l’embauche, et qui stipule que tout conflit interne doit se régler à l’intérieur des murs de l’entreprise. Ou comment laver son linge sale en famille, en somme. « C’est très pernicieux, reconnaît Maureen Sherry, car, en général, vous êtes tellement contente d’avoir le job que vous ne vous inquiétez pas de la portée, à long terme, d’avoir signé un tel papier. »
Selon un sondage effectué l’année dernière par Bloomberg auprès des diplômés des meilleurs MBA américains, six à huit ans après avoir quitté les bancs de l’université, les femmes gagnent en moyenne 20 % de moins. Plus éloquent encore, celles qui sont diplômées de la Business School de Columbia University et ont atterri à Wall Street gagnent environ 40 % de moins que leurs homologues masculins. Ce U4 lie les mains et coud les bouches, indéniablement.
Pour celles qui auraient l’outrecuidance ou le courage, c’est selon, de se plaindre aux ressources humaines, « on vous propose un chèque, assorti d’une clause de non-divulgation. La nature humaine étant ce qu’elle est, c’est imparable », complète une jeune femme qui travaille dans un fonds d’investissement.
Le temps des business angels
Néanmoins, les temps changent. Des initiatives, à l’instar de celle de Harvard qui cherche à lutter en faveur de la promotion des femmes à des postes à responsabilité, fleurissent ici et là sur d’autres campus. Les jeunes femmes sont aujourd’hui moins enclines à supporter ce que l’on appelle the gender gap. De fait, les "class actions" (actions collectives) se sont multipliées ces dernières années. En 2013, Bank of America a ainsi été condamnée à dédommager près de 5 000 femmes pour un montant de 39 millions de dollars ; en 2004, puis en 2007, la banque Morgan Stanley a été contrainte de verser, au total, 100 millions de dollars pour « discrimination sexiste » à plusieurs centaines de ses salariée ; en 2008, Citigroup lâchait 33 millions, et, en 2011, Wells Fargo 32 millions, pour les mêmes raisons. Chaque fois, les pièces versées au dossier sont édifiantes... « J’adore les femmes, mais elles font trop de drames ! » ; « Vous ferez partie du comité de direction lorsque vous saurez jouer au golf »... Lassées d’être perpétuellement confrontées à ce plafond de verre, de plus en plus de femmes dans la finance préfèrent créer leurs structures. « Elles sont aussi nombreuses à se mettre à leur compte, devenant business angels ou créant de micro-fonds d’investissement avec moins de 4 millions de dollars », explique Jennifer Fonstad, une ancienne de la société de capital-risque Draper Fisher Jurvetson. Mais d’autres, nombreuses elles aussi, finissent par capituler en acceptant un chèque en échange de leur silence lorsqu’elles démissionnent. Maureen Sherry, elle, a refusé. Pour rester libre de sa parole : « 40 % des foyers américains avec des enfants de moins de 18 ans dépendent entièrement des revenus de la mère. Pour les générations futures, il est temps de changer les cultures, en particulier celle de Wall Street », conclut-elle.
Reese Whitherspoon s’empare d’“Opening Belle”
Un soir de décembre, une financière de Wall Street se rend à la soirée de Noël de sa banque. Discrètement, elle cache les cadeaux destinés à ses trois enfants pour ne pas afficher trop clairement, vis-à-vis de ses confrères essentiellement masculins, qu’elle est non seulement mariée, mais mère de famille. Quelques heures plus tard, après s’être éclipsée pour se laver les mains, elle voit ses collègues jouer au foot avec la poupée Barbie de sa fille. Décapitée. Telle sera la première scène du film tiré d’Opening Belle, qui sera bientôt porté à l’écran. L’actrice Reese Whitherspoon a racheté les droits du roman de Maureen Sherry. C’est elle qui tiendra le rôle-titre de Belle McElroy, dans cette adaptation qu’elle développe pour Warner Bros. Aux côtés de personnalités telles que Lena Dunham, la productrice Shonda Rhimes ou Eva Longoria, l’actrice déplore « le manque de films avec une voix féminine, haute et claire. Il est important que celles d’entre nous qui ont atteint un certain niveau de reconnaissance dans cette industrie (le cinéma, NDLR) ouvrent la voie aux plus jeunes pour qu’elles réalisent leurs rêves ».
Depuis 2012, date de création de sa société de production avec l’Australienne Bruna Papandrea, Gone Girl et Wild ont enregistré de vrais succès et installé l’idée que des films mettant en scène un personnage central féminin de plus de 30 ans valaient le coup. Opening Belle s’inscrit dans cette veine. Et Maureen Sherry de souligner que depuis Working Girl, en 1988, aucun film n’a traité de la place des femmes dans la finance…
EDF investment decision on Hinkley Point faces further delay over UK’s alleged failure to consult Europe adequately on environmental impacts
EDF’s final investment decision on its GBP 18bn (USD 26bn) British nuclear power project Hinkley Point C could be delayed further after a UN committee found that the UK did not adequately consult with its European neighbours regarding the potential environmental impacts of the plant, The Guardian reported. Documents reviewed by the newspaper showed Britain is considered by a committee within the UN’s economic and social council to have breached its obligations in the matter.
The ruling is likely to hamper any final sign-off by France-based developer EDF until the issue is resolved, according to Paul Dorfman, senior researcher at University College London’s Energy Institute, the report said. Dorfman said a fresh legal challenge based on the UN ruling is likely, describing the latest development as a significant blow to the UK government.
A spokesperson for the UK Department of Energy and Climate Change stated that all relevant requirements had been met regarding international obligations relating to Hinkley Point C, the item reported. Austria, Ireland, Norway and the Netherlands complained they were not consulted on Hinkley by the UK but should have been because of the potential for a nuclear accident at the project resulting in radioactive pollution across the rest of Europe, the report said.
The Guardian
Goldman Sachs Research
Strategy Espresso: Earnings and target downgrades support more Fat & Flat
· We cut our top-down 2016 EPS growth estimate to -2% from 4% and raise our 2017 estimate to 15% from 10%.
· Our 2016 EPS downgrade is a function of a weaker global outlook, a stronger euro, lower inflation and commodity prices.
· Given our EPS growth adjustment, we lower our 3-, 6- and 12-month price targets for the STOXX Europe 600 to 335, 340 and 345; for the EURO STOXX 50 to 2970, 3020 and 3070. Our 12-month target for the FTSE 100 is lowered to 6300 from 6550.
· Our 12-month targets imply a 4% price return and 7.9% total return for the STOXX Europe 600, 4.5% and 8.7% for the EURO STOXX 50, 3.1% and 7.3% for the FTSE 100.
· A 7.9% total return is low from a risk-adjusted perspective, once the volatility of the equity market will have been factored in. In addition, our 6-month target of 340 for end 2016 represents a -7% decline YTD. We continue to view the prospect of a flat and flat environment.
We cut our 2016 earnings forecasts for the STOXX Europe 600 to -2% from 4%.
Source: Goldman Sachs Global Investment Research.
Earnings growth estimates
We cut our 2016 EPS growth estimate to -2% from 4% and raise our 2017 estimate to 15% from 10%. Our 2016 EPS downgrade is a function of (i) a weaker global outlook, (ii) a more Dovish Fed (stronger euro, lower risk-free rate) and (iii) weaker commodity prices than we forecast.
· (i) In January, the China slowdown and tightening of US and European financial conditions contributed to the downward revision of the GDP of European companies’ main trading partners. Our economists now expect the GDP of the Euro area to grow 1.4% in 2016 against 1.7% in January.
· (ii) Monetary policy divergence has not materialised as we expected and the macro backdrop of a more Dovish Fed worried by the global outlook and sinking commodity prices pushed out expectations of US interest rate rise. Consequently, the US dollar weakened and the euro appreciated 6% since the beginning of the year. Lower interest rates for longer also contributed to the compression of net income margins for banks and insurance companies, which account for 27%* of the STOXX Europe 600. We now see flat earnings for Financials in 2016 (0%) compared with 9% previously.
· (iii) Even though the Brent oil price has recently recovered from its drop to $27.9/bbl in January, the average price since the beginning of the year exceeds $37/bbl, which is lower than we anticipated. Commodities stocks are only 8%* of the STOXX Europe 600 but they have seen sharp downward revisions to their 2016 earnings estimates (-33% YTD), which dragged down the overall market estimate (-9%). We now expect earnings to slump 43% in 2016, compared with -28% previously.
We raise our 2017 EPS growth estimate from 10% to 15% as we expect Financials (30% of the SXXP*) to recover, benefiting from rising inflation and interest rates. Additionally, we expect commodities stocks to ‘rise from their ashes’ with earnings growing 89%. That said, these companies should not represent more than 8%* of the index in 2016.
This 'recovery' in 2017 is small in a historical context (see chart below) and the end 2017 EPS level that we forecast (24.7) is now below our previous forecast (25.9). We do not expect earnings to get close to the 2007 peak before 2018.
* Weights based on 2015 earnings.
European earnings have been falling since 2011, aside from 2014. The earnings growth we forecast in 2017 is small in a historical context.
Annual STOXX Europe 600 earnings growth.
Source: I/B/E/S via Datastream, Goldman Sachs Global Investment Research.
EPS have not recovered since the Global Financial Crisis, dragged down by Financials. We forecast European earnings to get close to the 2007 peak in 2018.
Quarterly trailing EPS for the STOXX Europe 600.
Source: Datastream, Goldman Sachs Global Investment Research.
Target prices
Given our EPS growth adjustment, we lower our 3-, 6- and 12-month price targets for the STOXX Europe 600 to 335, 340 and 345 (from 355, 360 and 380). We also adjust our 3-, 6- and 12-month forecasts for the EURO STOXX 50 to 2970, 3020 and 3070 (from 3200, 3250 and 3500). This implies slightly higher returns than for the STOXX Europe 600 given the Euro STOXX 50 has a higher beta. We expect this beta to slightly rise from the end of the year, with markets anticipating a rebound in Commodities and Financials in 2017.
We keep our 3 and 6-month targets unchanged for the FTSE 100, which is the best performing of the major European indices (in local currency) year-to-date. However, we lower our 12-month target to 6300 from 6550, which implies a 3.1% price return and a 7.3% total return.
We revise down our 3-, 6- and 12-month target prices for the STOXX Europe 600 and the EURO STOXX 50.
European indices expected price level, price return and total return.
Source: Goldman Sachs Global Investment Research.
IMG LN - Tsinghua Unigroup raises stake above 3% - Unclear whether Tsinghua is looking to be a minority stakeholder or to acquire company
Japan Fin Min Aso: Reiterates will submit supplementary budget for Kumamoto earthquake - comments from Parliament
1) Earnings season has seen a modestly positive surprise...
With one remaining busy week for the European earnings season, results so far have been quite similar to last quarter, where we saw a slightly higher number of beats than misses. Having tracked 339 companies, we've seen 37% of companies beat EPS estimates by 5% or more, while 31% have missed. The net 6% of companies beating so far is exactly in-line with last quarter. Headline earnings have beaten by 1.7%, while the median stock has delivered in-line results. Trends at the sector level have been mixed, with six out of 10 sectors having delivered results ahead of expectations. Utilities, Consumer Discretionary and Tech have delivered the weakest results, while Energy has seen the broadest earnings beats.
2) ... but this is largely down to the downgrades ahead of earnings season
While euro strength and macro data suggested a tough environment for European earnings in 1Q, we thought that results would not be too bad given the extent of downgrades ahead of earnings season. The earnings releases can hardly be described as strong, given that they are down over 20% compared to 1Q15, but more that results have cleared a lowered bar. Consensus downgrades ahead of earnings season are not surprising, however, the downgrades we saw ahead of 1Q were the largest we've seen in 5Y of data. Page 5 shows the change in quarterly consensus estimates in the run-up to results over the last 5Y. The downgrade to 1Q16 numbers was 9.4% against an average downgrade of 3.4%.
3) Revenues have been weaker than earnings
While earnings have registered a net beat, top-line results have been weaker. 28% of companies have beaten sales estimates by 1% or more, while 40% have missed. The net miss of 11% of companies would be the worst results for two years. The median stock has also missed revenue estimates by 0.3% and revenues are down 6% year-on-year. Top-line weakness in quarters of euro strength are not uncommon, and as shown on page 17, the more internationally exposed large-caps have seen weaker top-line results than mid- or small-caps, which is consistent with the revenue miss being driven largely by FX.
4) Price reaction to results has been slightly positively skewed
Page 11 shows the relative performance of stocks on the day of results depending on whether they beat or missed estimates. Earnings beats have outperformed, while misses have underperformed, but the outperformance of beats has generally been more positive than the underperformance of misses. Revenue misses of as much as 1% have still seen the stock outperform on the day of results.
5) Downgrades persist, but showing signs of slowing...
After a fleeting period of net upgrades last year, Europe has endured a difficult period of earnings downgrades year-to-date, with earnings revisions recently hitting their worst levels in four years. The four-week earnings revisions ratio is falling, but this is usual during earnings season and a somewhat more encouraging sign can be seen on page 5. When comparing the pace of downgrades now to 3M ago, it does suggest the second derivative for earnings estimates is now turning. Also, while the data is relatively patchy still given the limited sample, another source of encouragement is that 2016 guidance has been slightly positively skewed during results.
6) ... but we still see downside to FY2016
Results so far in 1Q have been slightly better than expected, a trend we wouldn't be surprised to see continue given that estimates for 1Q earnings came down aggressively ahead of results season. While 1Q estimates look broadly achievable, full-year figures do not. We forecast 2016 earnings to contract by 5% driven by a weak global growth environment, little margin upside, headwinds from commodity and financials combined with evaporating FX tailwinds. While the rise in commodity prices rising in the last couple of months could suggest more upward pressure to our estimates, our FX team's recent upgrade to their forecasts for the euro negates this benefit. Bottom-up consensus is now for a 0.4% decline in EPS this year.