We have extensively covered the evolution of Q2 earnings in the US where so far nearly half or 240 of firms have reported (and 136 on deck this week): from the revenue recession [4](2nd consecutive decline), to the overreliance on financial firms as the sole driver of EPS upside [5], to the fact that the only reason banks are beating [6]is to FAS115, the unaccounting of AFS swings and the suspension of MTM. In other words, no top-line growth and bottom-line upside solely due to financial balance sheet gimmicks. But what about, Europe where accounting magic is not nearly as advanced a science as it is in the US?
Not surprisingly, we find that of the 120 DJStoxx600 companies reporting so far, the revenue picture is about the same as in the US, with 58% of companies beating the topline and 42% missing, a carbon copy of the US' 58%/43%. But it is the EPS where the difference truly shines: while in the US some 73% of firms have "beat", in Europe this number is only 48%. The flipside, or misses? In the US it is 26%. In Europe: a majority of companies, or 51%. In brief, anyone expecting a quick and easy turnaround in Europe's corporate earnings picture will have to wait some more.
[7]
Source: Deutsche Bank