Stock Markets
Analysis-China slowdown prompts export-reliant Europe stocks rethink
© Reuters. A worker decorates the Frankfurt stock exchange with Nucera logos for the upcoming IPO of Thyssenkrupp’s hydrogen division Nucera as the German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, July 6, 2023. REUTERS
By Joice Alves
LONDON (Reuters) – A lack of clarity on Beijing’s planned stimulus measures will mean a mixed appetite for European stocks over the rest of 2023, investors say, with China the EU’s third biggest export market.
From high-end cars to luxury watches, Europe’s consumer discretionary and staples, technology, industrials and materials sectors all have significant revenue exposure to China.
So with a post COVID-19 recovery in the world’s second-largest economy losing momentum, investors are eager for details on policy support promised by Beijing to spur growth.
Lifting COVID restrictions in China was one of the key drivers of a rally in European equities earlier this year, but its economy is now sputtering.
Services activity in China expanded at the slowest pace in five months in June, while factory activity declined for a third straight month in June.
China faces challenges on many fronts, including a shrinking and aging population, debt-laden local governments, a property downturn and renewed geopolitical tensions.
“China reopening will likely be a headwind when they were actually a major tailwind in the first five months of the year,” said Karim Chedid, Head of the Investment Strategy for iShares at BlackRock (NYSE:) for EMEA.
“But let’s see if the policy stimulus changes things.”
European equities have responded accordingly.
The MSCI Europe index rose 10% in the first quarter, but by just 1% in the second, before it began declining as the outlook clouded.
China, the European Union’s third biggest export market after the U.S. and Britain, accounts for some 15% of the sales of companies in the MSCI UK and MSCI Germany indices, Barclays (LON:) calculates. French, Swedish and Swiss sales to China are 10%.
The EU exported more than 70 billion euros of products to China from January to April, figures released in June showed.
Clingendael, a Dutch think tank, estimated that last year, more than half of Rio Tinto (NYSE:)’s revenues came from China, the world’s biggest importer of raw materials. Rio’s shares have declined more than 12% so far this year.
On the consumer front, Clingendae estimates one third of luxury watchmaker Richemont’s revenues; a fifth of sports apparel company Adidas (OTC:) revenues and a fifth of luxury carmaker BMW revenues came from China.
Emmanuel Cau, head of European equity strategy at Barclays, who in May recommended taking some profit on China-sensitive stocks, upgraded the highly China-exposed European mining sector after the government unveiled stimulus measures.
“Better news in China now should be good news for Europe too,” Cau said.
But BlackRock’s Chedid is not convinced policy measures, which include interest-rate cuts, will be a game-changer.
WHICH STIMULUS?
Sources involved in policy discussions told Reuters that China’s stimulus will target shoring up weak demand in the consumer and private sectors.
Barclays economists expect any policy support in China to be mostly focused on supporting demand in services and boosting investment across technology, manufacturing and infrastructure, especially around data centres and green energy.
Goldman Sachs (NYSE:) economists believe headwinds in China will likely persist, as moderate policy easing this year will only partially offset challenges from the property market and what they call consumers’ and entrepreneurs’ pervasive pessimism.
The bank expects real GDP growth in China to accelerate to 5.4% year-on-year, compared to a global rate of growth of 2.4%, 1.8% in the U.S. and 0.5% in the euro area.
Fahad Kamal, chief investment officer at SG Kleinwort Hambros, said data from China has disappointed because expectations were too high. He continued to overweight European equities, and trimmed his exposure to China’s mid market.
“It’s still pretty good. The Chinese economy is on track to grow by 5% this year. It’s the world’s second largest economy! What would we give for the UK, or the U.S., or Europe to grow by 5%?” he said.
Luxury stocks have seen resilient demand, with shares in LVMH, Europe’s largest company by market value, up around 25% this year. LVMH, gets a quarter of its revenues from China.
Richemont, Burberry and Moncler, which each make a third of their revenue in China, are all up between 10% and 20% this year.
Shares in semiconductor company BE Semiconductor Industries, which according to Barclays makes around 40% of its revenues in China, have surged almost 70% this year.
Kevin Thozet, a member of the investment committee at Carmignac, said there will likely only be more fiscal stimulus in September or October.
“They (the Chinese government) will need to see more pain in the economy (and) more deterioration in the labour market before they do that,” he said.
Sterling Construction Company, Inc. (NASDAQ:) has reached an impressive milestone, with its stock price soaring to an all-time high of $137.93. This peak represents a significant achievement for the company, reflecting a robust performance and investor confidence. Over the past year, Sterling Construction has witnessed a remarkable 84.48% increase in its stock value, underscoring the company’s strong market presence and the positive reception of its strategic initiatives. Investors and market analysts alike are closely monitoring STRL’s progress, as it continues to build on its momentum in the construction sector.
In other recent news, Sterling Infrastructure, Inc. announced two key changes in its leadership. The company revealed the upcoming retirement of board member Charles R. Patton, effective from September 1, 2024. Patton, who has been a part of Sterling’s Board since 2013, will step down after over a decade of service, during which he contributed to the Corporate Governance & Nominating Committee and the Compensation Committee.
In parallel, Sterling Infrastructure named Dan Govin as its new Chief Operating Officer. Govin, who brings over three decades of experience in the energy infrastructure industry, is set to lead the company’s strategic and operational initiatives. His past roles include Regional President at Quanta Services (NYSE:) and Senior Vice President of Operations.
In related developments, Sterling Real Estate Trust, a North Dakota-based real estate investment trust, recently held its annual shareholders’ meeting. During the meeting, eight trustees were elected, including Gregory P. Hammes, Timothy L. Haugen, and Michelle L. Korsmo, among others. Additionally, the appointment of RSM US, LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2024, was ratified by the shareholders. These are among the latest developments at Sterling Infrastructure, Inc. and Sterling Real Estate Trust.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
CRH (NYSE:) PLC, a global leader in building materials, has reached an all-time high, with its stock price soaring to $91.22. This significant milestone underscores the company’s robust performance and investor confidence in its growth trajectory. Over the past year, CRH has seen an impressive 66.73% increase in its stock value, reflecting strong market demand and the successful execution of its strategic initiatives. The company’s ability to achieve this record price level amidst a dynamic economic environment speaks volumes about its resilience and the positive outlook shared by its stakeholders.
In other recent news, CRH Plc has seen a series of positive developments. Stifel, a financial services firm, has increased its EBITDA projections for the company by 4% for the years 2024 and 2025, following a positive outlook on CRH’s earnings. This includes the expected contributions from the newly acquired Adbri, which is predicted to add an additional 1% and 2% to the EBITDA in 2024 and 2025, respectively.
In addition, Deutsche Bank has raised its price target for CRH, maintaining a Buy rating on the stock, following the company’s acquisition of a majority stake in Adbri. This move is anticipated to enhance CRH’s materials solutions offerings in Europe.
Furthermore, CRH has appointed Lauren Schulz as its new Chief Communications Officer, a move expected to enhance the company’s global communications strategy.
Additionally, CRH has filed a notification regarding transactions by persons discharging managerial responsibilities, providing transparency into the dealings of the company’s management.
Lastly, CRH has reported strong growth in adjusted EBITDA and margin for the second quarter of 2024, and has raised its full-year adjusted EBITDA guidance to a range of $6.82 billion to $7.02 billion. These recent developments demonstrate the company’s resilience and strategic approach in a competitive market.
InvestingPro Insights
The ascent of CRH PLC in the stock market is not just a reflection of past performance but also a beacon for future potential, as suggested by InvestingPro data and insights. With a market capitalization of $60.88 billion and a forward-looking P/E ratio of 17.69, CRH is positioned competitively within the Construction Materials industry. Its commitment to shareholder returns is evident through a consistent dividend growth, having raised its dividend for the last four years, and a dividend yield of 1.39% as of the last twelve months leading up to Q2 2024. These financial gestures indicate management’s confidence in the company’s profitability, which is further supported by a strong gross profit margin of 34.85%.
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For those monitoring CRH’s trajectory, the stock is trading near its 52-week high, at 99.14% of its peak, with a previous close at $89.27. The company’s next earnings date is set for November 7, 2024, which will provide further clarity on its performance and outlook. With a fair value estimate of $101 by analysts and an InvestingPro fair value of $74.35, investors are presented with a nuanced picture of CRH’s valuation. As the market anticipates CRH’s next financial disclosures, the InvestingPro platform remains a valuable resource for real-time data and expert analysis.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
In a remarkable display of market confidence, Nelnet Inc (NYSE:) stock has achieved an all-time high, reaching a price level of $115.64. This milestone underscores a period of significant growth for the company, which has seen its stock value surge by 27.28% over the past year. Investors have rallied behind Nelnet’s strong performance, propelling the stock to new heights and reflecting optimism in the company’s future prospects. The all-time high represents not just a peak for the year but an unprecedented value in the company’s trading history, marking a momentous occasion for both Nelnet and its shareholders.
In other recent news, Nelnet Inc. has been under the spotlight following strong Q2 earnings and subsequent adjustments by TD Cowen. The firm increased Nelnet’s price target to $98.00, up from $96.00, while maintaining a Hold rating on the stock. This follows Nelnet’s Q2 2024 earnings report, which highlighted an EPS of $1.44, surpassing TD Cowen’s estimate of $1.33. The improved earnings were largely due to reduced operating expenses and a lower provision for losses. However, these gains were slightly offset by a decrease in fee income and a lower net interest income.
In recent developments, Nelnet disclosed its quarterly financial results to the Federal Deposit Insurance Corporation (FDIC). The report provides a snapshot of the financial health of Nelnet Bank, its wholly-owned subsidiary, and includes critical data such as assets, liabilities, and income. This commitment to transparency and regulatory compliance allows investors to gauge Nelnet’s financial stability and growth prospects.
Furthermore, Nelnet’s bank subsidiary, Nelnet Bank, also disclosed its quarterly financials. The report, known as the Call Report, is a significant indicator of the subsidiary’s contribution to Nelnet’s overall financial status. This routine disclosure aligns with the requirements of the Securities Exchange Act of 1934, providing a clear view of Nelnet Bank’s financial standing as of the last quarter.
InvestingPro Insights
In light of Nelnet Inc’s (NNI) recent achievement of an all-time high stock price, several InvestingPro Tips and real-time data points provide further context to the company’s financial health and market performance. Notably, Nelnet has demonstrated a robust track record by raising its dividend for 9 consecutive years and maintaining dividend payments for 18 consecutive years, which signals a strong commitment to shareholder returns. Additionally, analysts remain optimistic about the company’s profitability, expecting net income to grow this year.
From a data standpoint, Nelnet’s current market capitalization stands at $4.15 billion with a price-to-earnings (P/E) ratio of 26.88, which adjusts to a lower ratio of 22.02 when considering the last twelve months as of Q2 2024, reflecting a more favorable valuation for investors. The company’s revenue growth has been modest at 0.7% over the last twelve months, yet it experienced a more significant quarterly surge of 12.82% as of Q2 2024. Importantly, Nelnet’s stock is trading near its 52-week high, at 99.06% of this peak, and has seen a large price uptick of 31% over the last six months. These figures underscore the company’s strong market presence and potential for continued growth.
For those interested in deeper analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/NNI, which can provide investors with more nuanced insights into Nelnet’s performance and future outlook.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
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