1、March 5, 2010 Europe: Portfolio Strategy: Strategy Matters Goldman Sachs Global Economics, Commodities and Strategy Research 1 March 5, 2010 Europe: Portfolio Strategy Strategy Matters Positioning for surprises in earnings, sales and dividends On a top-down basis, we forecast higher than consensus e
2、arnings growth in 2010 and 2011. We expect further positive earnings revisions and surprises to support equities. We note that earnings surprises are not rewarded as much if they are purely the result of margin improvements. Higher earnings should also lead to positive dividend surprises.Positive ea
3、rnings revisions and surprises should support equities On a top-down basis, we forecast earnings will grow 38% in 2010 and 28% in 2011 versus consensus of 27% and 23%, respectively. As a result, we expect positive earnings revisions and surprises in 2010, which should support equities. Earnings supr
4、ises can have different drivers (and performance) We find that earnings surprises are rewarded differently by the market depending on their drivers. Companies surprising on both sales and earnings have performed best; however, companies that have surprised positively on earnings but negatively on sa
5、les underperformed the market. We provide a list of companies likely to surprise on sales or earnings. Investors can profit from positive dividend surprises Higher earnings should result in positive dividend growth and better sustainability of dividend yields. To profit from positive dividend surpri
6、ses we recommend buying dividend swaps and high dividend yield stocks. 2010 and 2011 EPS estimates likely be revised up following surprises Consensus EPS forecasts, indexed at 100 from period when forecasts available 3050709011013015017088 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
7、09 102007200620052008200920102011Indexed at 100Datastream, I/B/E/S, Goldman Sachs Global ECS Research. Christian Mueller-Glissmann, CFA +44(20)7774-1714 | christian.mueller- Goldman Sachs International Peter Oppenheimer +44(20)7552-5782 | Goldman Sachs International Gerald Moser +44(20)7774-5725 |
8、 Goldman Sachs International Anders Nielsen +44(20)7552-3000 | Goldman Sachs International Matthieu Walterspiler +44(20)7552-3403 | Goldman Sachs International Sharon Bell, CFA +44(20)7552-1341 | Goldman Sachs International The Goldman Sachs Group, Inc. does and seeks to do business with companie
9、s covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification, see t
10、he end of the text. Other important disclosures follow the Reg AC certification, or go to Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S. The Goldman Sachs Group, Inc. Goldman Sachs Global Economics, Commodities and Strategy ResearchMa
11、rch 5, 2010 Europe: Portfolio Strategy: Strategy Matters Goldman Sachs Global Economics, Commodities and Strategy Research 2 Executive summary On a top-down basis, we forecast pre-exceptional EPS for the European market (STOXX Europe 600) to increase 38% in 2010 and 28% in 2011. Earnings rose 75% in
12、 2003-4 from their end-2002 trough to the peak. Our forecasts imply a 72% rise over 2010-11 from the end-2009 trough which would bring earnings to 2% below their 2007 level. Consensus bottom-up earnings forecasts are now 27% and 23% for 2010 and 2011, respectively. Earnings momentum has been positiv
13、e for the last six months; this is the longest streak of positive momentum since 2007. We believe that earnings will improve in 2010 and 2011, and that positive earnings revisions should support equities. So far in the current results season, 40% of companies have beaten earnings estimates by more t
14、han 5%, and 36% have missed estimates by more than 5%. The average EPS surprise has been +0.6%. On an absolute basis, 49% of companies have beaten estimates while 43% have missed. Retail, Travel and Leisure, and Media have reported the best results this season. Telecoms, Healthcare and Technology ha
15、ve fared the worst in terms of beating expectations. Small caps have reported better results than large caps. On a market cap-weighted basis, there have been more positive than negative surprises, and the market cap-weighted average EPS surprise has been -2%. Fewer companies have surprised positivel
16、y on revenues than earnings so far (18% versus c.40%. Only 8% of companies have surprised positively on both earnings and sales. This means that 31% of companies have surprised on earnings but not on sales, which suggests an unexpected margin improvement. The market has rewarded companies that surpr
17、ised positively on both sales and earnings in this results season; these companies have performed strongest around the announcement. Similarly, companies that surprised on earnings mainly thanks to higher margins but reported sales in line with expectations performed well. However, companies that su
18、rprised positively on earnings but negatively on sales have underperformed the market. This suggests there is continued concern in the market over sustainable top-line growth. We provide a list of companies that are likely to surprise on earnings and sales. Following limited dividend increases and w
19、idespread dividends cuts in 1Q and 2Q 2009, more companies have started to increase dividends or have initiated payments and the average dividend increase has been higher in recent earnings reports. However, there has still been a large number of dividend cuts, most likely as dividends tend to lag e
20、arnings and 2009 earnings, on which 2010 dividends are based, represents the trough in this cycle. We continue to recommend selectively buying high dividend yield stocks (see Strategy Matters: Revisiting our high dividend yield baskets, January 8, 2010) to both equity (High dividend yield + growth b
21、asket, Bloomberg ticker: GSSTHIDY) and credit investors (Credit replacement basket, Bloomberg ticker: GSSTCYDY)1. 1Note: The ability to trade these baskets will depend upon market conditions, including liquidity and borrow constraints at the time of trade. March 5, 2010 Europe: Portfolio Strategy: S
22、trategy Matters Goldman Sachs Global Economics, Commodities and Strategy Research 3 Positive earnings revisions should support equities We continue to expect strong earnings growth in 2010 and 2011 Based on our top-down earnings model, we forecast pre-exceptional EPS for the European market (STOXX E
23、urope 600) to increase 38% in 2010 and 28% in 2011. Earnings rose 75% in 2003-4 from their end-2002 trough to the peak while our forecasts imply a 72% rise in 2010-11 from the 2009 trough, which would bring earnings to 2% below their 2007 level. The main drivers of our forecasts are strong yoy chang
24、es in commodity prices (Oil this is the longest streak of positive momentum since 2007. With the economic recovery underway and supportive economic indicators, we believe that earnings will improve in 2010 and 2011. Exhibit 6: Earnings momentum is still positive but has recently retraced slightly (O
25、ne-year forward earnings estimate upgrades downgrades)/ no. of estimates -30%-25%-20%-15%-10%-5%0%5%10%15%20%95 96 97 98 99 00 01 02 03 04 05 06 07 08 09STOXX Europe 600 4-week earnings momentumSource: I/B/E/S, Datastream, Goldman Sachs Global ECS Research. Continued positive earnings momentum shoul
26、d support equities Exhibit 7 shows the relationship between earnings momentum and market performance. We find that there is a close relationship between the two. This would suggest that the market focuses on companies profitability. We argued in, The equity cycle part 1: Identifying the phases, Octo
27、ber 22, 2009, that the relationship between earnings growth and price performance changes over the cycle. While earnings growth fuels equity market performance over the very long run, most of the earnings growth is not reflected in share prices when it occurs but, rather, when it is correctly antici
28、pated by investors in the Hope phase. Earnings momentum can be viewed as a “second derivative” for earnings; Exhibit 7 shows it matters to the market. March 5, 2010 Europe: Portfolio Strategy: Strategy Matters Goldman Sachs Global Economics, Commodities and Strategy Research 6 Exhibit 7: The Europea
29、n market anticipates earnings revisions two months earlier (One-year forward earnings estimate upgrades downgrades)/ no. of estimates -60%-40%-20%0%20%40%60%80%95 96 97 98 99 00 01 02 03 04 05 06 07 08 09STOXX Europe 600 4-week earnings momentum (lagged by 2 months)STOXX Europe 600 yoy performanceSo
30、urce: I/B/E/S, Datastream, Goldman Sachs Global ECS Research. However, it is also true that earnings momentum is not leading the market. When comparing the four-week earnings momentum for the Stoxx Europe 600 with the indexs year-on-year performance, we find the best fit by lagging the earnings mome
31、ntum by two months. By doing so, the weekly correlation between the yoy performance and the four-week earnings momentum is c.65%. This suggests that the market anticipates changes in profitability around two months ahead of consensus. Earnings momentum differs by country, sector and size Earnings mo
32、mentum is strong for OMX, FTSE 250 and FTSE 100; it is weakest for the IBEX. This corresponds relatively well with our country recommendations we are Overweight FTSE 100, DAX and AEX and Underweight SMI and IBEX (see Strategy Matters: A guide to selecting countries in European equities, January 15,
33、2010). By sector, Personal four-week rolling average Exhibit 9: Negative earnings momentum on banks (1-year forward earning estimate upgrades downgrades)/ no. of estimates; four-week rolling average -4.0%-2.0%0.0%2.0%4.0%6.0%8.0%10.0%OMXFTSE 250FTSE 100AEXSTOXX SmallSTOXXMidSTOXX Europe600SMIMDAXSTO
34、XXLargeDAXOBXEUROSTOXX 50MIBCAC 40IBEX-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%10.0%PHHGRetailChemicalsInd. Goodsthe market cap-weighted average EPS surprise has been -2%. March 5, 2010 Europe: Portfolio Strategy: Strategy Matters Goldman Sachs Global Economics, Commodities and Strategy Research 8 Exhibit
35、 10: Latest results of DJ Stoxx 600 companies have surprised marginally to the upside in aggregate STOXX 600 EQUAL-WEIGHTEDNumber of Companies Surprises 5% Absolute Surprises AvgReported Total % of Cos Positive Negative In-Line Positive Negative In-Line SurpriseRetail 3 11 27 % 67 % 33 % 0 % 67 % 33
36、 % 0 % 7 %Travel for sales we consider all surprises irrespective of size. The top half of Exhibit 18 shows companies that our analysts expect to surprise positively on both sales March 5, 2010 Europe: Portfolio Strategy: Strategy Matters Goldman Sachs Global Economics, Commodities and Strategy Rese
37、arch 12 and earnings and thus to outperform around the earnings announcement based on our backtest. The bottom half of the exhibit shows companies that our analysts believe are likely to surprise negatively on sales and earnings and should thus underperform. Exhibit 18: There are several companies t
38、hat our analysts expect to surprise on sales and earnings Company name RIC Reporting date Rating Price TargetConsensus EPSGoldman EPSExpected EPS SurpriseConsensus SalesGoldman SalesExpected sales SurpriseInmarsat Plc ISA.L 09/03/2010 N 822 0.37 0.40 8.5% 953 1,040 9.2%JCDecaux JCDX.PA 10/03/2010 B
39、21.3 0.19 0.21 11.8% 1,913 1,919 0.3%Pirelli PECI.MI 10/03/2010 N 0.61 0.01 0.01 23.4% 4,365 4,385 0.4%GEA Group G1AG.DE 11/03/2010 N 15.5 0.88 1.05 18.4% 4,422 4,451 0.6%Tognum TGMG.DE 11/03/2010 N 15.5 0.80 0.88 10.6% 2,538 2,541 0.1%Credito Valtellinese PCVI.MI 16/03/2010 N 5.5 0.25 0.29 17.2% 80
40、5 805 0.1%Derwent London DLN.L 17/03/2010 B 1,455 0.52 0.55 6.5% 116 124 6.9%Lanxess AG LXSG.DE 17/03/2010 N 33 0.65 0.80 23.8% 5,080 5,146 1.3%Wolseley WOS.L 22/03/2010 B 1,843 0.59 0.75 27.2% 12,836 13,201 2.8%Hochtief AG HOTG.DE 25/03/2010 B* 94 2.60 2.76 6.0% 18,586 18,782 1.1%Salzgitter SZGG.DE
41、 26/03/2010 B 88 -4.79 -2.73 42.9% 7,585 8,123 7.1%Neopost NPOS.PA 30/03/2010 N 60 4.78 5.11 7.0% 915 916 0.1%Company name RIC Reporting date Rating Price TargetConsensus EPSGoldman EPSExpected EPS SurpriseConsensus SalesGoldman SalesExpected sales SurpriseInternational Power IPR.L 09/03/2010 N 342
42、0.31 0.30 -5.5% 3,394 3,380 -0.4%E.ON EONGn.DE 10/03/2010 N 33 2.94 2.78 -5.3% 84,330 80,648 -4.4%Aixtron AIXGn.DE 11/03/2010 N 25 0.41 0.38 -8.6% 293 285 -2.8%K+S SDFG.DE 11/03/2010 S 42 0.64 0.58 -8.7% 3,470 3,419 -1.5%National Bank of Greece NBGr.AT 18/03/2010 S 11.2 2.01 1.85 -7.6% 5,071 4,959 -
43、2.2%Buzzi Unicem BZU.MI 23/03/2010 N 15.1 0.65 0.53 -18.6% 2,704 2,671 -1.2%Iliad ILD.PA 23/03/2010 S 84.8 3.33 3.06 -8.0% 1,956 1,955 -0.1%A2a SPA A2.MI 25/03/2010 N 1.75 0.07 0.03 -52.9% 5,760 5,653 -1.8%Monte Paschi BMPS.MI 25/03/2010 S 1.16 0.04 0.04 -7.0% 5,837 5,777 -1.0%All price targets are
44、based on a 12-month timeframe, with the exception of GEA and Neopost (6 months) and Aixtron (18 months). For important disclosures, please go to http:/ For methodology and risks associated with our price targets, please see our previously published research. Source: Bloomberg, Goldman Sachs Research
45、 estimates. March 5, 2010 Europe: Portfolio Strategy: Strategy Matters Goldman Sachs Global Economics, Commodities and Strategy Research 13 Investors can profit from positive dividend surprises STOXX Europe 600 dividend expectations stable (excl. financials) Consensus dividend growth expectations fo
46、r the STOXX Europe 600 have increased since the beginning of last year, but mainly for 2011 (Exhibit 19). Financials dividend expectations continue to be a drag on overall dividend growth (Exhibit 20); in particular, banks dividends have been revised down further. Stronger earnings should translate
47、into higher dividends; however, we do not think that higher earnings will immediately result in higher dividends. In most sectors, corporates remain cautious on the strength of the economic recovery and dividends are often set retrospectively. As a result, we expect a large part of the recovery in d
48、ividends to take place in 2011 (paid in 2012). Since the start of the year we have seen the first upward dividend revisions for non-financials. Exhibit 19: Consensus expects a slow dividend recoverySTOXX Europe 600 consensus dividend growth Exhibit 20: Financials are still a drag on dividend growthC
49、umulative change in STOXX Europe 600 consensus dividend estimate -18%-14%-10%-6%-2%2%6%10%14%18%22%Jan-08 Jul-08 Jan-09 Jul-09 Jan-102009 2010 2011Estimate changes since January 2009-30%-25%-20%-15%-10%-5%0%Dec-08 Mar-09 Jun-09 Sep-09 Dec-092010E2011E2010E excl. financials2011E excl. financialsSource: I/B/E/S consensus, Goldman Sachs G
