Travel, Banks and House Prices: a Q2 Earnings Recap

I’m
going
to
avoid
talking
about
“beats”
versus
“misses”,
because
as
we
all
know
this
is
just
a
reflection
on
how
well
firms
did
at
under
promising
and
overdelivering.
Rather,
I’m
going
to
walk
you
through
some
of
the
global
trends
we’ve
been
seeing
this
earnings
season,
and
where
the
differences
lie
between
US
and
European
earnings.

What’s
Happening
to
Banks?

Banks
are
on
the
mend.
That’s
the
short
story
from
what
we
have
seen
so
far
from
the
banking
world.
Capital
ratios,
particularly
in
Europe,
are
solid,
while
interest
rate
rises
are
allowing
banks
to
improve
their
profitability
once
again,
after
so
many
years
of
operating
with
tight
spreads
on
their
loan
books.
While
some
concerns
remain
in
the
US
around
banks
geared
toward
specific
sectors,
such
as
commercial
real
estate,
most
the
large
banks
we
cover
in
both
regions
have
proven
themselves
resilient
over
the
last
quarter.

What’s
Happening
to
Consumer
Stocks?

The
ability
to
raise
prices
has
never
been
so
important
in
the
consumer
sector,
with
inflation
finally
falling,
but
from
elevated
levels.
Luxury
goods
firms,
many
of
which
are
domiciled
in
Europe,
have
been
particularly
proficient
at
this,
with
their
customers
generally
less
price-sensitive.
Further
down
the
food
chain
however
it
has
been
more
of
a
bun-fight,
with
consumer
goods
firms
like
Colgate
pushing
through
price
increases,
but
barely
offsetting
rising
costs.

Similarly,
US-based
Kraft
has
managed
to
push
through
price
increases,
but
at
the
expense
of
market
share,
with
private
label
firms
and
smaller
competitors
pushing
hard
on
promotional
activity
to
gain
market
share.
In
Europe
this
problem
is
even
worse,
with
private
label
penetration
even
higher
than
north
America.
In
the
UK
most
recently,
market
share
data
showed
the
hard
discounters
have
been
continually
taking
market
share
from
the
large
traditional
supermarkets.

And
Travel
and
Transport?

Travel
has
been
a
strong
theme
on
both
sides
of
the
Atlantic,
with
Accor
hotels
in
the
US,
and
counterparts
like
Whitbread
in
the
UK,
reporting
strong
levels
of
bookings,
and
room
revenues.
This
is
despite
many
consumers
feeling
the
pinch
from
higher
mortgage
rates
and
elevated
food
bills.
But
after
an
extended
period
of
lockdown,
consumers
are
placing
a
high
value
on
being
able
to
travel
once
again.
Vinci,
the
European
listed
concessions
firm,
also
affirmed
this
trend,
with
rising
passenger
numbers
through
European
airports.

Another
knock-on
effect
from
the
pandemic
was
the
resulting
bottlenecks
in
the
shipping
industry.
This
led
to
a
scramble
by
industrial
and
consumer
firms
to
get
their
hands
on
as
much
stock
as
possible.
This
quarter’s
earnings
have
confirmed
that
many
firms
are
finally
destocking,
with
chemicals
firm
BASF
reporting
this
negative
effect
on
sales,
and
the
global
third-party
logistics
firms
Kuehne
+
Nagel
and
DSV
reporting
falling
volumes
as
a
result.
Materials,
which
have
been
harder
and
more
expensive
to
come
by,
are
finally
becoming
available
again,
according
to
European
elevator
manufacturer
Kion.

Oil
and
Housing

The
oil
majors
in
the
US
and
Europe
sang
from
the
same
hymn
sheet
this
quarter,
with
the
effects
of
depressed
oil
and
gas
prices
earlier
this
year
coming
through
in
the
form
of
lower
revenues.
The
silver
lining
however
was
falling
costs,
which
rose
in
tandem
with
energy
prices
last
year.
Despite
similar
levels
of
performance,
we
see
a
big
opportunity
with
the
European
oil
majors,
namely
Shell
and
BP
over
their
US
counterparts
Exxon
and
Chevron.
The
valuation
gap
between
the
two
is
partly
driven
by
ESG
concerns
by
European
investors,
a
situation
we
believe
will
rectify
itself
over
time
as
the
European
majors
ramp
up
their
investment
in
green
energy.

One
major
discrepancy
between
the
US
and
Europe
is
around
housing
markets.
House
prices
in
the
US
have
largely
held
up
over
the
last
year,
despite
rising
interest
rates.
In
Europe
the
price
declines
have
been
felt
more
sharply,
heaping
pressure
on
homebuilding
stocks,
some
of
which
have
more
than
halved
in
the
last
year.
The
good
news
however,
is
that
interest
rate
rises
should
soon
be
coming
to
an
end,
while
input
costs,
namely
housebuilding
materials,
are
coming
down
from
their
recent
highs.
This
should
alleviate
the
pressure
on
the
European
homebuilders
and
allow
their
share
prices
to
correct.

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