STOXX 600 Q2 2020 Earnings Preview

Q2 2020 marks the sixth consecutive quarter of negative year-over-year (YoY) earnings growth for the STOXX 600. Earnings growth is expected to be -53.9%, which is the worst quarter since inception of this report. Additionally, Q2 revenue growth of -17.2% marks the beginning of a ‘revenue recession’ for the STOXX 600 as defined by two consecutive quarters of negative YoY growth.

Looking at Exhibit 1, we observe that analysts started to make aggressive downward revisions to STOXX 600 20Q2 earnings growth expectations in mid-March and continued to do so until early May.

Exhibit 1: STOXX 600 Q2 Earnings Growth Rate


Negative YoY earnings growth is expected across most of the index this quarter. Of the 309 constituents included in the Q2 earnings growth calculation, 221 are expected to post negative earnings growth which represents 72% of constituents.

Cyclical sectors are most affected this quarter from both earnings and revenue perspectives. Consumer Cyclicals, Energy, Industrials, and Basic Material sectors are expected to post Q2 earnings results of -129.0%, -126.5%, -93.4%, and -66.4% respectively. Similarly, Q2 revenue results are expected to be -32.0%, -38.9%, -26.2% and -21.5% respectively.

Within Consumer Cyclicals, German and Italian automobile manufacturers including Volkswagen (VOWG_p.DE)(VLKAY), Fiat Chrysler Automobiles (FCHA.MI)(FCAU), and Bayerische Motoren Werke (BMWG.DE)(BMWYY) are expected to post 20Q2 earnings results of -141.6%, -354.0%, and -75.4% respectively.  Earnings and revenue figures also remain negative for all three companies in Q3.

Within Energy, integrated oil & gas majors including Royal Dutch Shell (RDS-A), BP (BP.L), and Total SA (TOT)(TOTF.PA) are expected to post Q2 earnings results of -165.6%, -156.0%, and -113.0% respectively. According to Reuters, Royal Dutch Shell is expected to take a post-tax impairment charge of $15-22 billion this quarter after lowering its long-term outlook on oil and gas prices. While Brent oil prices have stabilized between $38-42 a barrel since June, earnings and revenue growth remain negative for these companies in both 20Q3 and 20Q4.

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