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STOXX 600: A Mixed Bag for Q4 European Earnings Amid Continued Pressures


By Sebastian Segerstrom  |  March 23, 2023

Nearly 94% of companies in the STOXX Europe 600 have reported their fourth quarter, with earnings growth of 8% on aggregate.

In September, analysts projected 9% earnings growth for the index, a significant slowdown compared to Q4 2021 (68%) when the markets started to normalize after the pandemic. Notably, Europe is reporting positive earnings growth compared to the US, which reported negative earnings growth of 5% for Q4.

Real Estate Earnings Dropped Through the Floor While Telecommunications Reported Stellar Growth

The Real Estate sector reported a 151% earnings decline in Q4. While analysts expected Real Estate to report a significant earnings drop back in September for Q3 (-88%), companies came in significantly lower on earnings then.

Telecommunications, on the other hand, reported very strong earnings growth of 240%. In the third quarter of 2022, analysts had expected even higher growth with estimates the sector would grow 348%. For full year 2022, Energy was the stand-out sector with 642% earnings growth in the region. The sector delivered 56% earnings growth for Q4.

7 out of 11 Sectors Performed Better Than Analysts Expected Coming Into the Quarter

In fourth quarter 2022, individually seven sectors of the STOXX Europe 600 came in higher than analysts had estimated earlier. However only five of the seven sectors reported positive earnings growth.

On aggregate the index still reported positive earnings growth, driven mainly by Telecommunications, Energy and Financials. On the opposite spectrum, Real Estate, Basic Materials and Consumer Discretionary all reported significant negative earnings growth. Even though earnings growth on aggregate is normalizing compared to the past two years, there are clear winners and losers affected by the interest rate environment, inflationary pressures and continued supply-chain bottlenecks.


Source: FactSet


Revenues have also normalized in the fourth quarter this year, with index members on aggregate reporting 6% revenue growth. Energy continues to outgrow the rest of the region, albeit at a slower pace (24%)a similar story as last year, which was highlighted in the Q4 2021 European earnings update.

Except for Utilities (-103%), all other sectors reported revenue growth in Q4, with five sectors growing double digits. The underlying factor for such a steep Utilities revenue decline was the Electricity sub-sector, as many of its companies struggled in Q4.


Source: FactSet


Fewer Companies Beat Expectations YOY on Earnings Estimates, With the Highest Percentage of Misses Since 2017

The percentage of companies that reported actual earnings above analysts’ estimates was 50%, significantly lower than 59% in CY22. Among the remaining firms, 39% came in below expectations, with companies in the Real Estate and Basic Materials sectors missing expectations by 55% and 56%, respectively.

For Real Estate specifically, it’s a stark contrast to last year when every company in the sector either delivered earnings that were in-line (22%) or better than expected (77%).

On the positive end, 72% of companies in the Telecommunications sector beat analysts’ expectations, and a large percentage of Financials and Technology companies beating expectations at 67% and 61%, respectively.


Source: FactSet


If we look at the aggregated fourth quarter earnings compared to the previous five years, fourth quarter 2022 saw the highest percentage of missed earnings since 2018. In addition, the number of companies that beat analysts’ consensus estimates was significantly lower than the two previous yearsmuch closer to that of the pre-pandemic period. That there was a lot of uncertainty and therefore analysts lowering their expectations during the initial two years of the pandemic is probably the reason, while this year’s figures seem to be closer to the normal distribution we have seen historically.


Source: FactSet


Revenues Across the Index Also Struggle, But There Are Indications of a Potential Shift to More Normal Performance

On the revenue side, most companies in the STOXX Europe 600 either came in below consensus (44%) or in-line (44%). More than 50% of the companies across four out of the 11 sectors on the index beat analyst expectations for the fourth quarter.

Like last year, companies in the Real Estate sector managed the highest percentage of beats with 69% of companies coming in above estimates, compared to 83% last year. High inflation supports the sector’s increased revenues, while the interest rate increases drove the opposite effect on sector earnings.

Most companies in the Utilities sector that continued the trend of earnings and revenue beats last year nevertheless struggled with Q4 earnings. In both sectors, analysts couldn’t forecast the full impact of shrinking margins.

Telecommunications had most companies report revenues as expected (76%), with Health Care and Consumer Staples companies just behind at 66% and 62%, respectively.


Source: FactSet


Even though companies didn’t beat analysts’ expectations on revenues to the same extent as last year—a clear outlier compared to historical figures—companies nevertheless beat expectations at a higher percentage compared to historical results. In addition, even though the number of companies that beat analyst expectations are still higher than the historical average, companies that missed estimates or reported in-line are just slightly below the historical average. This indicates the market and expectations of the street are reverting back to more normal figures.


Source: FactSet


Looking Ahead, Sectors Will Face Continued Headwinds and New Uncertainties

When summarizing 2022, it’s clear that companies are experiencing the effects of higher inflation and interest rates, with the Real Estate sector being the most negatively impacted. Conversely, other sectors like Telecommunication have benefited.

Pandemic supply-chain bottlenecks are still creating uncertainty in the markets even though, on aggregate, we see a reversion to pre-pandemic levels.

Looking ahead, analysts expect CY23 to deliver, on aggregate, an earnings decline of -4%, compared to -3% back in December. The Basic Materials (-39%) and Energy (-22%) sectors are expected to be the drivers of negative growth, while Financials are expected to grow earnings by more than 20%.

The expectation is for continued flat revenues, the same as December. One exception could be the Utilities sector, which is expected to report a 19% revenue decline for CY23.

With the mounting liquidity pressures affecting the financial sector and potentially further impacts to the wider markets throughout the year, the continued interest rate hikes of the central banks will be an area of focus as we look further into 2023.


This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.

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Sebastian Segerstrom

VP, Research Solutions, Director of EMEA Sales

Mr. Sebastian Segerstrom is a Product Strategist at FactSet based in London. In his role, he works on developing FactSet’s research offering. He contributes within public and private markets, IPOs, M&A, private equity, and earnings for FactSet Insight. Prior to joining FactSet in 2016, Mr. Segerstrom earned a Master of Science in Corporate and Financial Management at Lund University in Lund, Sweden.


The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.