(News Bulletin 247) – Many groups, including those on the CAC 40, suffered violent corrections in the first part of this results season, particularly in the automotive and consumer sectors.

The market has been heavy-handed in this half-year results season in Europe. Corrections and punishments have multiplied in recent days.

The CAC 40 is no exception. The season is not over, with a dozen companies in the index still having to publish their accounts. But of the 26 companies that have already submitted their copies, 11 recorded an increase in the session following their publications, and 15 a decrease, according to a count carried out by News Bulletin 247. We would even be tempted to add the 9.4% fall of Airbus (which is publishing its results this Tuesday evening) following its profit warning in June. And of the 15 recorded declines, 10 were greater than 3%, 7 were more than 5%.

“We have seen an asymmetrical reaction from the markets, especially in recent days, with companies publishing good results experiencing occasional moderate increases while the flops have been very expensive,” Matthias Desmarais, head of research at Oddo BHF, said on News Bulletin 247 on Friday.

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Luxury in the hard

Looking closely, the results are not necessarily so bad in absolute terms. In a note published on Monday, Bank of America notes that of the 40% of companies in the Stoxx Europe 600 that have already delivered their accounts, the increase in earnings per share is on average around 4%. “If this continues, it would be the first positive growth rate since the fourth quarter of 2022,” notes the American bank.

“Although the second quarter results were generally correct, the season nevertheless frightened the market due to signs of tension among consumers,” the establishment added.

“Continued weakness in demand in China was joined by surprising weakness in the United States, with both regions particularly problematic for luxury goods, consumer staples and automobiles in the second quarter, while deteriorating U.S. advertising and transportation trends also weighed on European peers,” Bank of America said.

Luxury has, indeed, struggled throughout the season. Whether it is Burberry, Swatch, Kering or to a lesser extent LVMH, their stocks suffered after generally disappointing publications, the slowdown in demand for luxury products being palpable, particularly in China. Moncler, however, fared a little better, growing by 1.9% following the publication of its results. Hermès (+3.4%) confirmed its status as the best student in luxury, with growth in comparable data that atomized the competition in the second quarter (+13.3%). Its management spoke of a “flight to quality”, which to simplify, pushes consumers of luxury products to favor the most qualitative brands (therefore Hermès) when the macroeconomic context becomes more uncertain.

Beyond luxury, several companies have been forced to lower their outlook, such as STMicroelectronics, Capgemini and Nestlé.

But this season, it’s best not to disappoint the market. Bank of America points out that European companies that have already reported and delivered earnings per share below expectations have underperformed their benchmark index by a median of 2.4 percentage points in one session. According to the bank, this is the most pronounced underperformance in at least twelve years. In contrast, the median outperformance for companies that beat expectations is only 0.8 percentage points.

Above all, the market has been extremely strict with the slightest hitch. Renault has clearly paid the price.

Punishments that are difficult to understand

The diamond group lost 7.5% following its publication last Thursday, almost as much as Stellantis (8.7%) on the same day. While the car manufacturer resulting from the merger between Fiat Chrysler and PSA had published results that were totally below expectations and in free fall, Renault had produced a copy deemed satisfactory by analysts.

“Renault did not disappoint with a record operating margin driven by a slight overrun of its automotive margin. On July 25, the analyst/investor meeting having been calm and positive, how can we explain the 8% decline in the stock since its publication of the first half of 2024? The contagion effect seems to be the best explanation, after a publication by Stellantis, on July 25, of results for the first half of 2024 significantly lower than the consensus expectations,” Bernstein tried to explain on Monday.

Renault is just one example. Thales also suffered (-6.7% in the session following its results) while its results ticked most of the right boxes. The failure on cash generation and especially the downward tightening of its margin target, due to the difficulties of its space activities, weighed heavily in the balance. Jefferies speaks of a “punitive” reaction while the results were “largely in line with expectations”.

And what about Edenred, which plunged 13.5% following its publication, while all its main indicators exceeded expectations, with Deutsche Bank citing “very solid” results? “Nothing in the publication justifies such a sanction, the group is growing rapidly, at a speed that even a luxury group is not able to display,” confided an analyst last week. Some research firms, such as Alphavalue, have mentioned the slowdown in growth in the second quarter (which still remained at 16.3% in comparable data after 20.5% in the first quarter) to try to explain this sanction.

Even Carrefour’s 4.8% drop may seem a bit harsh, given that results were in line with consensus. But the Europe excluding France region largely missed expectations in terms of profitability.