Analysts’ consensus earnings expectations for the EMU continued to plummet through the week of June 19. The estimates for 2014 and 2015 are down 7.0% and 5.0% YTD. Forward earnings have been flat-lining for over a year and remain well below the 2007 record high and the last cyclical peak in early 2011. Forward earnings have been flat to down for all the major core and peripheral countries of the EMU since 2011.
The rebound in the EMU MSCI stock price index since the summer of 2011 has been all attributable to an 87% increase in the forward P/E from 7.6 to 14.2. The forward P/Es are especially elevated for the Eurozone’s peripheral countries. Here’s the latest forward P/E derby: Greece (32.4), Ireland (19.2), Portugal (19.1), Belgium (16.8), Finland (16.5), Spain (15.6), Netherlands (14.6), Italy (14.5), France (14.1), Germany (13.0), and Austria (11.6).
It’s the same story for the United Kingdom: Earnings estimates have been falling sharply for 2014 and 2015. Yet the UK MSCI stock index is back at its previous two cyclical peaks. The rally since the summer of 2011 was all led by a 68% increase in the forward P/E from 8.1 to 13.6.
Today's Morning Briefing: Global Earnings Derby. (1) US MSCI continues to outperform. (2) Forward earnings still rising to record highs in US. (3) Emerging markets have the best revenues profile. (4) Eurozone earnings expectations freefalling for 2014 and 2015. (5) Same goes for UK. (6) Europe isn’t cheap anymore. (7) Japan’s “third arrow” sparks P/E-led rally. (8) EM forward earnings still flat-lining. (9) Industrial commodity prices diverging from oil price. (10) Flash PMIs are mixed. (11) US economy is upbeat. (12) Abe shows his third arrow.
