by Tajinder Dhillon.
18Q2 earnings season is wrapping up with 24 companies reporting last week ending August 17, 2018. Exhibit 1 provides a summary of reporting results.
Exhibit 1: Earnings Season Results
Of the companies that reported last week, 50% beat EPS expectations and 50% missed EPS expectations. In addition, 50% beat Revenue expectations and 50% missed Revenue expectations.
The company who beat EPS expectations by the largest amount was Schindler Holding AG (SCHP.S) with a positive 31.7% surprise. The company who missed EPS expectations by the largest amount was K&S AG (SDFGn.DE) with a negative -446% surprise.
The company who beat Revenue expectations by the largest amount was NN Group NV (NN.AS) with a positive 16% surprise. The company who missed Revenue expectations by the largest amount was RWE AG (RWEG.DE) with a negative -56.6% surprise.
RWE AG, a German Utility company suffered a -56.6% surprise in revenue in 18Q2 whilst also experiencing a decline in revenue growth of-72.4% year-over-year, as seen in Exhibit 2.
Exhibit 2: RWE AG 18Q2 Revenue Surprise
Whilst reporting is clouded with the on-going asset swap with EON, CFO Markus Krebber highlighted, “adjusted EBITDA came down by 21% as expected, mainly due to lower realized generation margins and volumes … the revised outlook only reflects the accounting-driven adjustments and not any changes to our expectation for the operational performance.”
Whilst there is noise in the numbers, the impact of the Revenue miss is dramatically shown in Exhibit 3, as the Utilities revenue growth rate has declined from 9.3% at the beginning of earnings season to -11.5% after RWE AG reported.
Exhibit 3: Utilities and STOXX 600 Revenue Growth Rates
Source: Proprietary Research
We can also see in Exhibit 3, how the Utilities sector has impacted the overall STOXX 600 revenue growth rate, which has also declined from 6.4% at the beginning of earnings season to 2.9%.