European corporates defy fears of earnings gloom as outlook improves

By Javi West Larrañaga

Nov 5 (Reuters) - The outlook for European corporate health has substantially improved, the latest earnings forecasts showed on Tuesday, as investors' worst fears for quarterly earnings failed to materialise.

European firms are expected to report growth of 4.3% in third-quarter earnings, on average, according to LSEG I/B/E/S data, above the 0.4% increase analysts expected a week ago.

However, the outlook for revenue deteriorated with forecasts of a 0.9% decrease, compared with a 0.1% fall expected last week. That would confirm a trend, seen in five out of six most recent quarters, where company earnings have outpaced revenues.

Companies are increasingly relying on cost savings and restructurings to offset falling revenues as hard up consumers cut back.

Big beer and spirits makers are among the companies tightening purses to keep their margins intact. Budweiser-brewer Anheuser-Busch InBev ABI.BR said cost-cutting helped it post a profit beat despite a bigger-than-expected fall in volumes. Aperol-maker Campari CPRI.MI also beat forecasts.

Rival brewer Carlsberg posted a slight third-quarter miss in terms of sales, but flagged deep cost cuts.

"We've been adjusting, especially discretionary spending. We've been going very hard at travel, entertainment, conferences, and consultants," Carlsberg CEO Jacob Aarup-Andersen told Reuters.

Dutch retailer Ahold Delhaize AD.AS, which operates the Food Lion chain in the United States, was among companies that beat estimates. It reported a profit of 933 million euros for the quarter on Wednesday, compared with the average forecast of 866 million euros according to company-compiled data.

Luxury carmaker Ferrari also posted core profit above expectations on Tuesday, having already raised its annual guidance earlier in October.

THE ATLANTIC WIDENS

Despite the improving outlook, the difference in performance between European and U.S. companies has become more pronounced now that more than half of STOXX 600 .STOXX companies have reported results.

Earnings of S&P 500 .SPX companies were forecast to rise 13.8%, a different LSEG I/B/E/S report found. Of the 315 companies that had reported by Friday, 83.2% posted earnings above analyst estimates, the highest beat rate in four years.

In contrast, out of the STOXX 600 companies that published their results, 55.3% have beaten earnings expectations.

Not all geographies are faring equally, with Polish and Irish companies in the index expected to increase earnings 65% and 28.3% year-on-year, respectively, while Danish and Norwegian companies are forecast to see 20.8% and 14.9% falls.