Yahoo Finance StockBeat: Dire Results and Forecasts Send Markets Tumbling
By Geoffrey Smith
Investing.com -- Europe’s stock markets were broadly lower again Tuesday, thanks to some grim trading updates from across the region that cut across numerous sectors, illustrating the breadth of the problems at Europe Inc.
German airline Lufthansa (DE:LHAG) said its preferred measure of operating profit fell 25% in the second quarter, thanks to overcapacity and cooling demand, problems that rival Ryanair had flagged on Monday.
Lufthansa said it expects its low-cost Eurowings subsidiary, which was supposed to immunize it against the threat from discounters such as Ryanair (LON:RYA) and EasyJet (LON:EZJ), to lose money this year, with an adjusted profit margin as low as -6%.
Another German company to disappoint was Bayer (DE:BAYGN), whose shares fell 3.9% after the company said organic sales growth rose only 1% on the year in the second quarter. It also said that its profit targets looked “increasingly ambitious”, given the mounting liabilities from its Roundup weedkiller and given the weakness of demand from U.S. farmers for its crop sciences products. Extreme weather and the U.S. trade conflict with China have both taken their toll
But the falls in Lufthansa and Bayer (DE:BAYGN) are just sideshows compared to the carnage at two of Europe’s biggest energy-related companies. Centrica (LON:CNA), the U.K.’s biggest utility, fell nearly 12% to its lowest in over 20 years, after outgoing chief executive Ian Conn slashed the company’s dividend by over half in response to price pressures and pension deficits. Conn, who had been expected to stand down, also announced the sale of the company’s oil and gas production arm, Spirit Energy.
And elsewhere, the world’s biggest producer of offshore wind turbines, Siemens Gamesa (MC:SGREN), fell over 15% after revising down its profit margin forecasts for the year in response to sustained lower prices – a reflection of the growing maturity of the wind energy market in Europe, where governments are rapidly phasing out subsidies. In contrast to Centrica (LON:CNA), some shareholders in Gamesa can still hope to realize some profits, having seen the shares rise some 60% since October.
Vestas Wind Systems (CSE:VWS) and Nordex (DE:NDXG), two other large turbine makers, were each down around 5% in sympathy.
It’s not all doom and gloom, however: oil and gas giant BP (LON:BP) rose 2.9% after higher production offset lower prices, allowing it to post underlying profit ahead of analyst expectations and unchanged from a year ago.
Like many other commodity-oriented U.K. stocks, BP’s share price is getting a bump from the sharp drop in sterling over the last week, which makes their dollar-denominated income streams automatically more valuable in the companies’ reporting currency.
The FTSE 100 was again the best performing of the major European indexes, falling less than 0.1%, while Germany’s Dax fell 1.2% and the benchmark Euro Stoxx 600 fell 0.8% to its lowest in a week.
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