Thursday, 13 August 2015

European earnings and the emerging markets: Adecco, Nestle, Coca-Cola Hellenic

Earnings: cannot live without them but when they appear to have been constantly coming out for weeks and weeks even the most enthusiastic investor sags a little.

So the better news is that by my estimations this week is the last big earnings week for the Q2 period. Nevertheless a little bit of catching up to.  First Adecco which I last looked at a year ago (link here) and which actually has had a good last year (away from Financial Orbit I noted the CHF70 level the shares fell back to a couple of months ago as a good trading opportunity - which I undertook and also traded out of).

Looking through the results they issued earlier in the week, two aspects struck me.  First the two geographic parts of their business with relative momentum was Europe and the Rest of the World...and not North America...
 ...which probably helped pull down the overall perception of the group's revenue analysis sequentially from the first '+' for years back to a '='.

That sounds like a world where the convention of US strength is perhaps overdone (and I would argue this is akin to the conclusions of my latest Financial Orbit Speaks available in a tab at the top of the page).  

Want another indicator of potential emerging market relative demand?  Then take a look at Nestle's numbers from earlier today.  


With full year numbers reiterated the operational positives were probably centred on the control of costs (albeit allowing a clear expansion of marketing spend).  The new CFO also made some noises about further ongoing initiatives on the cost control side which shareholders will appreciate (as we will see when we look at the share price chart in a moment). 


Divisionally there was less of major excitement with major trends as we were previously (although at least organic growth was positive for all divisions).  


I concluded in my last review of the company (link here) that below CHF70 was a always a level to get more excited about Nestle shares.  With a higher teens EV/ebit ratio (and despite modest leverage, a 3%+ dividend yield etc.) this remains the case.  Certainly a higher quality name - and one which is also still highlighting the relative momentum for them in the emerging markets. 


Finally I have a piece coming out on Share Prophets tomorrow about today's Coca-Cola Hellenic Bottling numbers.  Suffice to say the growth in their emerging markets business was also noted: 


Kind of interesting given the current sentiment malaise regarding the emerging markets that you can still find interesting stocks with exposure to the still structurally interesting space.  

Another indication of why you should like specifics like companies and not generalities like indices currently. 

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