Philips, BASF May Lead Increase in European Earnings

Earnings at Europe’s biggest companies probably rose in the third quarter, led by exporters as emerging markets compensated for cooling economic growth.

Royal Philips Electronics NV, the world’s biggest lighting company, may double profit to 366 million euros ($515 million) from 174 million euros a year earlier when it reports earnings on Oct. 18, according to 13 analysts surveyed by Bloomberg. It made a third of revenue in emerging markets in the second quarter and aims to raise that to at least 40 percent by 2015.

“We don’t have much concern about the ability for corporates to match estimates,” said Vincent Treulet, chief strategist at BNP Paribas Investment Partners in Paris, which oversaw 533 billion euros as of June 30. Beyond 2010, “it’s becoming harder to display a strong growth in profits. Analysts have tended to be quite aggressive.”

Earnings are rebounding from the third quarter of 2009, when the euro-area economy emerged from its worst recession since World War II. Growth may slow this quarter as the euro’s 12 percent gain since July and concern about the strength of the recovery eat into profit. Europe’s economy will probably expand 1.7 percent this year and 1.5 percent in 2011, according to an Oct. 6 forecast by the International Monetary Fund.

Chemicals

Industrial production in Germany, Europe’s largest economy, increased more than three times as much as economists forecast in August, the Economy Industry said Oct. 7. BASF SE, the world’s biggest chemical maker, expects a jump in sales this year after demand from China spurred production during the usually slower summer months, the company said Sept. 22.

BASF, based in Ludwigshafen, Germany, may say on Oct. 28 that profit rose to 1 billion euros from 237 million euros a year earlier, according to six analysts surveyed by Bloomberg.

Chemicals companies in the Stoxx Europe 600 “will show the best earnings in that index in the third quarter, but also in the fourth,” said Christian Stocker, senior strategist at UniCredit in Munich.

Shares of ASML Holding NV, Europe’s biggest semiconductor equipment maker, rose the most in 19 months on Oct. 13 after third-quarter earnings beat analyst estimates. The Veldhoven, Netherlands-based company got half of its 2009 sales from Taiwan and Korea and 4.3 percent in Europe.

Euro’s Advance

“Growth in emerging markets is holding up well,” said Romain Boscher, head of equities at Groupama Asset Management in Paris, which oversees 97 billion euros. “What’s saving us is the fact that large listed European companies make 60 percent of their business outside Europe, including about 40 percent in emerging markets.”

The euro may start to hurt earnings by making goods and services less competitive on the world market, he said.

“The euro is more of a threat for 2011 than for 2010,” Boscher said. “It passes into earnings with a six-month delay as big companies use hedges.”

Siemens AG, which sells 85 percent of its goods outside Germany, will probably post net income of 455 million euros for its fiscal fourth quarter, according to the average of seven estimates in a Bloomberg News survey. That compares with a 1.13 billion-euro loss in the year-earlier period and would be the smallest profit since the quarter ended March 2008.

Siemens added 0.7 percent to 81.06 euros at the 4:30 p.m. close in Frankfurt. BASF climbed 1.7 percent to 50.97 euros. Philips fell 1 percent to 23.88 euros.

BMW, Fiat

Carmakers may also report higher earnings, and beat estimates, UniCredit’s Stocker said.

“We can see some earnings surprises in the automotive sector, but investors are already expecting to see very good results,” he said. “Earnings will certainly be better than average.”

Bayerische Motoren Werke AG and Daimler AG’s Mercedes-Benz unit, the two biggest luxury-car makers, projected higher fourth-quarter sales on surging demand in China.

Daimler’s third-quarter profit is estimated to be 1 euro a share by five analysts surveyed by Bloomberg, up from 4 cents a year earlier.

Volkswagen AG may increase earnings to 1.75 euros a share from 43 cents, two analysts forecast. Nine-month deliveries jumped 13 percent to a record 5.37 million vehicles, Europe’s largest automaker reported today.

Fiat, Nokia

Fiat SpA will raise its financial targets for 2010 when the company reports quarterly figures on Oct. 21. The Italian carmaker which manages Chrysler Group LLC will post a full-year net income, Chief Executive Officer Sergio Marchionne told reporters in Paris on Sept. 30. The company had forecast “near breakeven” in April.

Fiat rose 1.1 percent to 11.80 euros in Milan. Daimler gained 0.7 percent in Frankfurt, while BMW fell 1.1 percent.

Nokia Oyj is counting on its N8 smartphone to revive demand after three reductions in forecasts.

The world’s biggest maker of mobile phones may report its smallest profit in six quarters on Oct. 21 as it waited for the phones to be finished and shipped. Net income was probably 188 million euros, based on a survey of 19 analysts. That compares with a loss of 559 million euros a year earlier as the company wrote down its Nokia Siemens Networks venture.

To contact the reporters on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net; Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net.

To contact the editor responsible for this story: Kenneth Wong in Berlin at kwong11@bloomberg.net

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