Earnings season is well underway, with many companies performing above analysts’ expectations. This morning, European shares headed for a flat to slightly higher open, with investors focusing on company results as the second-quarter earnings season gathers pace.
So far, 70% of reporting companies in the S&P have exceeded predicted figures – although the predictions were relatively low. In general, earnings reports begin to come out one or two weeks after the last month of each quarter. Earnings expectations for this round are modest, but the two major US banks, JP Morgan and Wells Fargo, both beat projections. Bank of America reported its biggest quarterly profit in nearly four years and Citigroup, eBay, and Netflix all followed with strong quarterly results.
In the UK yesterday, British Land Co reported a first quarter dividend of 7.9 pence. Chief Exec Chris Grigg said: “We’ve taken advantage of favourable market conditions to raise £350 million of convertible bonds at a zero coupon, continuing our strong track record in accessing funding on competitive terms from a range of sources.”
Yesterday in the US, Morgan Stanley became the last major bank to report its quarterly earnings, also beating expectations. Revenue rose to $9.6 billion from $8.52 billion a year ago.
Reporting in Europe today, German business software maker SAP’s revenues topped expectations due to a surge in internet-based cloud software. Sweden’s Handelsbanken reported quarterly operating profit slightly above market expectations as influx of business and lower costs helped offset the impact of negative interest rates imposed by the central bank.
On the other hand, in the UK, Royal Mail fared less well; it announced that its revenue for the first quarter remained the same from the previous year. The group’s core UK parcel, international and letters business division reported a 2% drop in revenue. This division accounts for 80% of revenue and 60% of operating profits. Royal Mail were hit hard in June by the announcement that the government would be selling off more of its stake in the company, when their shares dropped more than 4%.
The UK-based IG Group also reported today, with shares falling 6 percent after a blow to full-year earnings from the Swiss franc’s fluctuations in January. However, online domestic appliances retailer AO World jumped 9.7 percent after reporting a strong start to second-quarter trading.
In the US, Apple, Harley Davidson, Verixon Communications are also set to release results later today. According to a report by Factset.com, Apple is expected to be propping up the Information Technology sector for Q2 2015. The blended earnings growth rate – which combines actual results for companies that have reported and estimated results for companies yet to report – for the Information Technology sector is 0.2%; however, excluding Apple, the sector would be reporting a year-over-year decline in earnings of 6.0%.