Bloomberg News

European Stocks Decline Amid Earnings Reports From BASF to ABB

July 25, 2013

Europe Stock-Index Futures Little Changed Amid Earnings Reports

A financial trader reacts as he works at his computer screens at the Frankfurt Stock Exchange in Frankfurt. Photographer: Ralph Orlowski/Bloomberg

European stocks declined from an almost eight-week high as companies from BASF SE to ABB Ltd. reported earnings that missed analysts’ estimates.

BASF fell to a three-month low after also saying that full-year targets now look more challenging. ABB tumbled the most in three months as its first profit increase in six quarters trailed forecasts and its order book shrank. Siemens AG plunged the most since August 2011 after saying it won’t reach its profit-margin goal for the 2014 fiscal year. Michelin (ML)& Cie. lost 1.4 percent after posting a 13 percent slide in first-half earnings.

The Stoxx Europe 600 Index dropped 0.5 percent to 299.63 at the close of trading, after earlier falling as much as 1.1 percent. The benchmark yesterday rose to its highest level since May 30 as data signaled Germany is leading a revival in euro-area manufacturing and companies posted results that exceeded estimates.

“Expectations for European earnings have been falling as confidence has ebbed throughout the euro zone,” Justin Urquhart Stewart, who helps oversee about $6.8 billion at Seven Investment Management in London, wrote in an e-mail. “Although economic growth expectations are improving somewhat for next year, these are not being translated into either current corporate results or corporate outlooks.”

Forty seven companies in the Stoxx 600 are reporting results today, according to data compiled by Bloomberg. Analysts have reduced their estimates for full-year earnings at the gauge’s companies by 7.7 percent since the start of the year.

Economic Reports

Investors also weighed U.S. reports that showed first-time jobless claims increased more than forecast last week and durable-goods orders climbed at a better-than-expected pace in June. In Germany, data showed business confidence rose for a third month in July.

National benchmark indexes fell in 14 of the 18 western European markets. Germany’s DAX dropped 1 percent. The U.K.’s FTSE 100 slid 0.5 percent. France’s CAC 40 lost 0.2 percent.

BASF dropped 4.5 percent to 66.74 euros. The world’s biggest chemical company said second-quarter earnings before interest, taxes and one-time items fell 5.4 percent to 1.83 billion euros ($2.41 billion). The average estimate of analysts in a Bloomberg survey had called for 1.99 billion euros.

“The economic environment is and remains volatile,” Chief Executive Officer Kurt Bock said in a statement. “Achieving our earnings target is significantly more challenging today than we had expected at the beginning of the year.”

ABB, Michelin

ABB (ABBN) lost 3.1 percent 20.78 Swiss francs, its biggest retreat since April 17. The largest maker of power transformers posted second-quarter net income of $763 million that missed the $779-million average estimate of analysts surveyed by Bloomberg. Orders fell 7 percent.

Siemens plunged 6 percent to 78.62 euros after saying that it no longer expects to achieve its profit-margin target of at least 12 percent for the year to end September 2014 because of “lower market expectations.”

Michelin slid 1.4 percent to 75.84 euros. Europe’s largest tiremaker reported a 13 percent decline in first-half profit as slumping auto markets in its home region sapped demand and sales of tires for earthmovers dropped. Operating profit excluding one-time items declined to 1.15 billion euros. The figure beat the 1.12 billion-euro average forecast.

Orange SA declined 3.2 percent to 7.50 euros. France’s former phone monopoly posted an 8.5 percent drop in earnings and disclosed tax liabilities of 2.14 billion euros.

Commerzbank Writedown

Commerzbank AG lost 1.6 percent to 6.74 euros, after rallying 8 percent in the past five days. Germany’s second-biggest lender wrote down the value of a portfolio of credit extended to the bankrupt city of Detroit, Armin Guhl, a Commerzbank spokesman, said.

Nutreco NV (NUO) climbed 3.2 percent to 35.64 euros as the biggest maker of fish feed said it expects 2013 earnings before interest, taxes, amortization and exceptional expenses to at least equal the 2012 level. The company has made a confident statement about full-year prospects, ABN Amro Bank NV said.

Rolls-Royce Holdings Plc advanced 5.1 percent to 1,240 pence, its highest price since at least 1988. The second-biggest maker of commercial-aircraft engines said first-half profit jumped 34 percent as Boeing Co. and Airbus SAS delivered more planes.

Randstad Holding NV (RAND) gained 3.1 percent to 37.48 euros. Berenberg Bank said the company’s performance report showed “strong cost control” to compensate for weak growth in the second quarter. The bank also expects Randstad’s second-half growth to be “positive.”

Logitech International SA jumped 8.6 percent to 6.67 francs, rallying the most since April 2012. The biggest maker of computer mice posted its first year-on-year revenue growth in seven quarters and affirmed its outlook for the fiscal year.

Axel Springer AG surged 17 percent to 40.34 euros, its largest increase since January 1999. Europe’s biggest newspaper publisher agreed to sell regional newspapers and women’s and television magazines to Funke Mediengruppe GmbH for 920 million euros.

To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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