This week’s earnings batch should offer yet more evidence of the delicate balancing act European companies are performing as they try to deliver growth while being whiplashed by inflation, and supply-chain and recessionary pressures. A spate of upgrades to sales guidance signals consumers are willing to stomach higher prices, although it remains to be seen for how long and whether this may come at the expense of sales volumes. Watch Heineken on Monday following AB InBev and Diageo’s beats last week. High oil and gas prices unsurprisingly pushed oil majors like Shell to soaring profits and chunky buybacks, a move expected to be replicated by BP on Tuesday. And Hapag-Lloyd’s guidance boost on Thursday may be a harbinger for Maersk in a year that could mark a peak for the Danish container line.
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Earnings highlights to look out for next week:
Monday: Heineken (HEIA NA) is due to report at 7:00 a.m. CET. The world’s second-largest brewer may continue to see gains in the first half as it benefits from some on-premises reopening through the second quarter, Bloomberg Intelligence says. Consumer reaction to inflation will be critical, writes BI’s Duncan Fox, adding that price increases are needed to offset input-cost pressure. CEO Dolf van den Brink warned in the first quarter of economic uncertainty and “additional inflationary headwinds” and suggested the brewer may need to raise prices further.
Tuesday: BP (BP/ LN) is due to report at 7:00 a.m. London time. The UK energy giant is expected to post bumper quarterly results as high oil and gas prices more than offset the negative impact of its withdrawal from Russia. The company could extend its quarterly buyback run-rate achieved in the second quarter of $2.5 billion, Bloomberg Intelligence’s Will Hares says. That’s on the back of historically high operating-cash generation, strong oil-and-gas trading and a significant improvement in refining margins. BP’s £18 billion investment in the UK this decade shouldn’t be affected by the country’s windfall tax.
- BloombergNEF: BP made clean energy investments totaling $2.72 billion in 2021, trailing TotalEnergies ($5.33 billion) and Shell ($2.85 billion) as oil and gas companies at-large expand their low-carbon portfolios and set net-zero targets, according to BNEF’s Energy Transition Investment Trends 2022 report.
Wednesday: Denmark’s Maersk (MAERSKB DC), scheduled to report before market open, is set for a strong second quarter on the back of historically high containerliner rates, according to BI’s Lee Klaskow. The consensus adjusted Ebitda estimate is for an increase of 74% year-on-year to $8.8 billion, with the surge in rates seen counterbalancing volume declines. Thursday’s guidance increase from German peer Hapag-Lloyd bodes well for Maersk, analysts at Citi and Morgan Stanley say. BI expects rates to continue ticking downwards in the second half while still keeping a safe distance from historical averages, making 2022 likely a year of “peak earnings” for Maersk and the containerliner industry.
Thursday: Bayer (BAYN GY) is up at 7:30 a.m. CET. Although drugmakers tend to be more insulated from inflationary pressures, energy costs will have an outsized impact on Bayer’s expenses this year compared with European peers GSK, Novartis and Sanofi, according to BI. That said, surging commodity prices and a strong pricing environment should spur double-digit revenue gains from its crop science business, although the Roundup overhang remains. While pricing headwinds in China may damp sales of bloodthinner Xarelto, watch for newer medicines Nubeqa, Kerendia and Verquvo to provide a counterweight, BI’s Michael Shah says.
- BI Litigation Watch: Bayer’s US court setbacks in June and July support BI’s thesis that the company’s $16 billion reserve for litigation surrounding its Roundup weedkiller will have to be tapped and will only be enough to cover 200,000 cases.
Friday: Allianz (ALV GY) is set to publish quarterly results at 7 a.m. CET. The German insurer will have its work cut out to match the year-earlier operating profit level after forking out 400 million euros to scale back operations in Russia. AllianzGI is also beating a hasty retreat from the US after pleading guilty to fraud and agreeing to pay almost $6 billion for misrepresenting the risk posed by a group of hedge funds that collapsed in the early 2020 market meltdown. Volatility probably pummeled the asset management business again last quarter, according to BI’s Charles Graham, who’s expecting net outflows, although he sees better results in property and casualty offsetting lower profit in life and asset management. On a broader front, supply-chain breakdowns may hold opportunities for all commercial insurers as corporate clients seek more business-interruption insurance, BI says.
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