Equities Outlook – European earnings in focus

Over the past few days the main interest was in US stockmarkets, with the release of the US CPI rates being in the markets’ focus. The fact that US inflation remained elevated for January is worrying and tends to underscore the possibility that the Fed could maintain its hawkish approach and continue hiking rates and keeping rates at high levels for a prolonged period, while at the same time markets’ expectations for any possible rate cuts in the current year seem to fade away. But also across the Atlantic, ECB tends to maintain a quite hawkish approach as it raises its interest rates. In this report we’ll take a different approach and try to outline some European companies that are about to release their earnings reports in the coming days. We conclude with a technical analysis of DAX, to top the fundamentals.

Airbus’s deliveries

Airbus’s share price has been on the rise for the past five days reversing losses made since the last days of January and is back on one of the highest levels since 2020. Market participants’ interest seems about to peak on Thursday as we will be getting the earnings report for the last quarter. Market expectations are for the revenue figure to rise to 20.85 billion and the EPS figure to reach 1.73, both being quite optimistic. Yet we should note that the earnings have been steadily rising over the past three quarters despite being below market expectations sometimes, with the last figure being at 13.31 billion. At the release, we intend to keep out on the number of commercial aircraft the company expects to deliver in the coming year. An issue at which Airbus seems to have started the year on the back foot.  On a fundamental level, we note that the company may be in a tight spot. Media tend to highlight possible delays in the delivery of new aircrafts, with internal structure, operational controls and performance being to blame, an issue that would be key also for the share price’s performance on Thursday.

Commerzbank, rise of interest rates to give a helping hand?

Commerzbank’s share price remained relatively stable since the start of the month, after a sharp drop. We highlight the release of the company’s earnings report on Thursday. The earnings per share figure is expected to drop to 0.3409 from prior quarter’s 0.4698. It should be noted that the bank suffered a continuous contraction of its revenue figure over the past three quarters and expectations of the market run high as it is expected to reverse the downtrend and report a rise with revenue reaching as high as 2.64B. We intend to keep an eye out for the net income figure which is expected to drive growth for the bank. Another interesting element is to be whether the bank benefited from the interest rate hikes imposed by ECB and was able to improve its revenue and profitability figures. It should be noted that the bank is in a restructuring program until 2024, with branches closing. Also media tend to report that the bank is to propose a EUR0.20 dividend per share for the financial year 2022, the first since 2018.

Renault, driving back to dividends

Renault’s share price has been on the rise since the start of the month reaching just above 43.00 which would represent an almost 18% rise in its value. The French automaker is to release its earnings report tomorrow, Thursday and the EPS figure is expected to rise to 2.85 if compared to last June’s 2.33 and the revenue figure to explode up to 14.4B if compared to prior figure of 9.78B. On a fundamental level, we highlight the reports that Nissan is to contribute 174 million Euros to Renault for Q4. That would total a contribution for the year of 526 million Euros, reportedly the highest amount since 2018 and the arrest of the alliance’s founder and architect Carlos Ghosn, which was accused for financial wrongdoing. We intend to keep our eyes open for any guidance about what is ahead for the French automaker, while we highlight any possible signals for a dividend after three years which could boost the share price.     

Análisis técnico

GER40 Cash, 4 Hour Chart

Support: 15270 (S1), 14900 (S2), 14580 (S3)

Resistance: 15660 (R1), 16015 (R2), 16295 (R3)

Looking at GER40 Cash, we note that the index’s price action has been moving in a sideways manner between the 15660 (R1) resistance line and the 15270 (S1) support line since the 2  of the month. We tend to maintain our bias for the sideways motion to continue between the prementioned levels, given that the RSI indicator seems to continue to hover just above the reading of 50. Also please note how the Bollinger bands have narrowed and levelled out, also implying a stabilization of the index. Yet we have to note the scaled advancements the index has made over the past two months and some bullish tendencies may be present. Should the bulls actually take charge of the index’s direction, we may see DAX breaking the 15660 (R1) resistance line and aim for the 16015 (R2) resistance level, which has not seen any price action since January 2020. Should the bears take over, we may see the index, dropping, breaking the 15270 (S1) support line and aim for the 14900 (S2) support level.   

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