Investors deliver harshest punishment for earnings warnings in 16 years
By Lucy Raitano
LONDON (Reuters) — European companies are getting punished harder for earnings misses than at any time in at least 16 years as investors grow increasingly unforgiving in the face of soaring global interest rates, war in the Middle East and a murky economic outlook.
This week has seen shares in a raft of blue-chip companies get slammed, not just for missing forecasts, but even for excessive optimism given how weak the outlook for growth is.
French payments company Worldline lost 70% in value in a day after cutting its full-year targets without much explanation, while drugmaker Sanofi (NASDAQ:SNY) lost 15% on Friday after dropping its 2025 targets. Barclays, a big UK lender, fell as much as 8% after signalling major cost cuts because of weakness on its home turf.
European companies that missed earnings per share expectations this reporting season have seen their share prices fall by an average of 6.18% in the five days after reporting, versus a 2.04% average gain for those that beat them, according to Morgan Stanley.
In the five days after results, shares are tending to drop following a miss by far more than they tend to gain following a beat. In fact, according to Morgan Stanley, this divergence is at its highest since 2007.
«The market forgives nothing at this time,» Angelo Meda, a portfolio manager at Banor SIM in Milan, said.
«Worldline cutting its cash flow estimates without giving a real reason, Campari (LON:0ROY) coming out below expectations without explaining where that comes from, Siemens Energy having to ask for a state guarantee, Volkswagen (ETR:VOWG_p) and Volvo (OTC:VLVLY) Cars giving messages that are clearly too optimistic given the macro picture.»
Mark Denham, head of European equities at
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