Profit growth is biggest in 6 years
Source: Bloomberg News |
April 12, 2011, Tuesday
|
Print Edition
Print Edition
EUROPEAN companies are reporting the biggest profit rise in six years as the region's economic expansion overcomes the sovereign debt crisis, making stock strategists almost twice as bullish as their United States counterparts.
While Portugal became the third euro member to seek a bailout from the European Union, the benchmark Stoxx Europe 600 Index rose 0.6 percent last week, extending its two-year rally to 78 percent. The region's single currency posted its biggest first-quarter gain on record. Yields on Spanish and Italian bonds are falling compared with German bunds, a signal investors don't expect the debt debacle to spread.
Earnings for Stoxx 600 companies may rise 20 percent in 2011, led by exporters from Bayerische Motoren Werke AG to Cie de Saint-Gobain, according to data compiled by Bloomberg. The increase would bring the two-year gain to 93 percent, the most since 2005, leading 11 strategists tracked by Bloomberg to predict an 8.1 percent rise in benchmark indexes. US forecasts show the Standard & Poor's 500 Index will gain 5.3 percent.
"Profits are there and this shows us the economy is in good health," Alain Bokobza, the Paris-based head of asset allocation strategy at Societe Generale SA, said in a phone interview from New York. "Equities should remain resilient."
Net income for companies in the index probably rose 33 percent in the first quarter, Bloomberg data show.
Companies in the Stoxx 600 trade for 13.7 times reported profits, compared with 15.6 for the S&P 500, according to data compiled by Bloomberg. That's the biggest discount since the start of 2009. The ratio falls to 11.3 for 2011 European estimates, the lowest level since 2008 based on reported income.
"Europe looks cheap relative to the US," Gary Baker, head of pan-European equity strategy at BofA Merrill Lynch Global Research, said in a Bloomberg Television interview on April 6. "You're still going to see above-long-term-average rates of earnings growth this year and next."
BMW in Munich reported 2010 earnings last month that beat analysts' estimates, helped by Chinese sales of its 5-Series cars. British American Tobacco Plc in London rallied to a record high this month as Europe's largest cigarette maker increased prices in Japan and sold more premium Kent cigarettes in Russia.
Short-term financial aid for Greece, Ireland and Portugal won't be enough and it's "inevitable" they will restructure debt, said Harvard University professor Kenneth Rogoff.
Portugal asked for EU aid last week as the country faced 9 billion euros (US$13 billion) of bond maturities in April and June.
While Portugal became the third euro member to seek a bailout from the European Union, the benchmark Stoxx Europe 600 Index rose 0.6 percent last week, extending its two-year rally to 78 percent. The region's single currency posted its biggest first-quarter gain on record. Yields on Spanish and Italian bonds are falling compared with German bunds, a signal investors don't expect the debt debacle to spread.
Earnings for Stoxx 600 companies may rise 20 percent in 2011, led by exporters from Bayerische Motoren Werke AG to Cie de Saint-Gobain, according to data compiled by Bloomberg. The increase would bring the two-year gain to 93 percent, the most since 2005, leading 11 strategists tracked by Bloomberg to predict an 8.1 percent rise in benchmark indexes. US forecasts show the Standard & Poor's 500 Index will gain 5.3 percent.
"Profits are there and this shows us the economy is in good health," Alain Bokobza, the Paris-based head of asset allocation strategy at Societe Generale SA, said in a phone interview from New York. "Equities should remain resilient."
Net income for companies in the index probably rose 33 percent in the first quarter, Bloomberg data show.
Companies in the Stoxx 600 trade for 13.7 times reported profits, compared with 15.6 for the S&P 500, according to data compiled by Bloomberg. That's the biggest discount since the start of 2009. The ratio falls to 11.3 for 2011 European estimates, the lowest level since 2008 based on reported income.
"Europe looks cheap relative to the US," Gary Baker, head of pan-European equity strategy at BofA Merrill Lynch Global Research, said in a Bloomberg Television interview on April 6. "You're still going to see above-long-term-average rates of earnings growth this year and next."
BMW in Munich reported 2010 earnings last month that beat analysts' estimates, helped by Chinese sales of its 5-Series cars. British American Tobacco Plc in London rallied to a record high this month as Europe's largest cigarette maker increased prices in Japan and sold more premium Kent cigarettes in Russia.
Short-term financial aid for Greece, Ireland and Portugal won't be enough and it's "inevitable" they will restructure debt, said Harvard University professor Kenneth Rogoff.
Portugal asked for EU aid last week as the country faced 9 billion euros (US$13 billion) of bond maturities in April and June.
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