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STOXX 600 Earnings Season Update: Energy Underperforms While Tech Outperforms

Companies and Markets

By Sebastian Segerstrom  |  August 19, 2020

As the STOXX 600 Q2 2020 earnings season comes to an end, it’s clear that this earnings season has been filled with uncertainty with analysts significantly lowering estimates during the quarter as the global COVID-19 pandemic worsened. With 80% of the companies in the STOXX 600 reporting results for Q2 2020, reported earnings fell by 65% while revenues declined by 25%. At the same time, due to a lack of guidance from companies we saw the lowest in-line figures reported on revenues for the past five years and earnings were significantly below the five-year historical average for in-line results (within +/- 2% of the consensus estimate is considered in-line).

Comparing Performance to the S&P 500

There are many similarities between the Q2 2020 performance of the STOXX Europe 600 and the U.S. S&P 500. Across both major indices, Information Technology wasn’t as affected by the pandemic as expected by analysts. For the STOXX 600 Information Technology companies, 82% of the sector beat estimates. In fact, the sector only saw a 5% decline in earnings and 4% decline in revenues, highlighting the clear correlation between top-line and bottom-line figures as well as the sector’s resilient business models.

Energy was the STOXX 600 sector that underperformed the most compared to analyst expectations with 50% of companies coming in below estimates for earnings and 69% on revenues. On aggregate, Energy reported an earnings decline of 142% as well as the largest decline in revenue (57%) in the STOXX 600. This echoes what we have been seeing for the S&P 500 in Q2 2020, where Energy is showing the biggest decline both for earnings and revenues. As most of the companies in the STOXX 600 Energy sector are commodity dependent with oil being the main factor, the sharp decline of oil prices created even more headwinds for the sector during the second quarter and explains the large revenue decline. Interestingly, the STOXX 600 Energy sector didn’t see the same decline in earnings as the S&P 500 (142% and 162%, respectively) even though the revenue decline was slightly higher in Europe (57% and 54%, respectively).

STOXX 600 Company Earnings and Revenues Contracted in Q2 2020

Let’s look at the numbers in detail. To date, with 80% of the companies in the STOXX 600 reporting results for Q2 2020, the reported earnings growth for the quarter was -65%. The Health Care sector was the only sector reporting minimal positive earnings growth while Real Estate had a very small decline. The rest of the sectors all had major declines across the board with Consumer Discretionary, Energy, and Industrials all falling over 100%, meaning that they on aggregate have reported negative earnings for the quarter. Information Technology only had a slight decline of 5% compared to Q2 last year.

STOXX 600 reported earnings growth Q2 2020

On the other hand, the reported revenue growth for the STOXX 600 for the second quarter came in at -25%. The Real Estate sector still grew by 10% while most sectors saw relatively small declines of less than 10% compared to Q2 last year. Energy took a massive hit with revenues falling 57%, while Consumer Discretionary (-37%), Industrials (-28%), and Materials (-20%) all fell more than 20% compared to the previous year.

STOXX 600 reported revenue growth Q2 2020

Earnings Fell Sharply in Q2 2020, But Largely Beat Estimates

In terms of earnings, the percentage of companies reporting actual earnings above estimates was 55% while 34% came in below expectations. On aggregate, companies are reporting earnings that are 27% above estimates but the reported growth came in at -65% compared to Q2 2019, heavily affected by COVID-19. Information Technology reported the largest surprise with 82% of companies beating very bearish analyst estimates. Energy was the most negative sector with 50% of companies coming in below estimates. Due to a lack of guidance for Q2, analysts had a hard time making their estimates as shown by the low amount of companies reporting in-line compared to the past five years.

STOXX 600 cos earnings above inline below estimates Q2 2020

If we look at Q2 2020 compared to the previous five-year historical average, this year doesn’t stand out much. There are slightly more companies beating estimates as well as a low percentage of companies performing in-line with market expectations on earnings for this quarter compared to the past five years. This can largely be explained by the bearish market sentiment and lack of company guidance compared to previous years.

Historical percentage of STOXX 600 cos with earnings above inline below estimates

Only One Third of Companies Had Q2 2020 Revenues In-Line with Estimates

On the revenue side, most companies on the STOXX 600 also came in above consensus (45%) while 32% were in-line with estimates. On aggregate, companies are reporting revenues that are 2% below estimates. Industrials stand out significantly with 67% of companies beating expectations. 69% of Utilities companies came in below expectations on revenue even though half of the sector beat on earnings. Information Technology and Communication Services both came mostly in-line on revenues while most companies in the Information Technology sector beat on earnings.

STOXX 600 cos revenues above inline below estimates Q2 2020

If we look at the Q2 2020 revenue figures compared to the five-year historical average, Q2 2020 had the greatest number of companies beating estimates compared to the past five years and significantly above the average. We also see significantly more companies missing estimates than the five-year average. As we can clearly see for revenues—and consistent with what we saw for earnings—the uncertainty is both on sales as well as company earnings during this pandemic outbreak.

Historical percentage of STOXX 600 cos with revenues above inline below estimates

Looking Ahead

Analysts see earnings declines of -35% for Q3 as of August 13, compared to an estimated 14% decline for Q3 expected back in March. For CY 2020, analysts are now expecting a 41% decline, compared to a 11% decline back in March. Estimates will continue to be volatile during the rest of 2020 as analysts are trying to estimate the continued impact of COVID-19 and the sudden halt to the global economy, as well as the possibility of a second wave and further outbreaks across various countries and regions.

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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.