European Stocks Decline Amid Earnings Shortfalls

Volvo plant
Automobiles move along the production line at the Volvo Cars plant in Torslanda, Sweden. Volvo said first-quarter operating profit surged almost fivefold as the manufacturer scaled back production to meet a cost-savings target for 2015. Photographer: Kristian Helgesen/Bloomberg

April 25 (Bloomberg) -- European stocks fell, trimming their fifth weekly gain in six weeks, as companies from Neste Oil Oyj to Sandvik AB posted quarterly earnings that missed estimates and tensions escalated between the U.S. and Russia over Ukraine.

Neste Oil slid 5.1 percent after also lowering its 2014 profit forecast. Sandvik lost 3 percent. Deutsche Bank AG declined 2 percent after a report that it may announce a capital increase. Electrolux AB rallied the most in five years after posting earnings that beat estimates and increasing its forecast for European demand growth. Meda AB jumped to a record after the Financial Times said Mylan Inc. raised its offer for the Swedish drugmaker.

The Stoxx Europe 600 Index slipped 0.8 percent to 333.5 at the close of trading. The gauge posted a weekly advance of 0.3 percent amid increased mergers-and-acquisitions activity.

“Earnings are not really good,” Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg, said by telephone. “Expectations are relatively low. They’ve revised down over the last month. There is still the problem in Russia. We don’t know how this situation will evolve.”

National benchmark indexes declined in all 18 markets in western Europe except Norway. The U.K.’s FTSE 100 dropped 0.3 percent, and Germany’s DAX lost 1.5 percent. France’s CAC 40 retreated 0.8 percent.

Ukraine Deadlock

U.S. President Barack Obama prepared to call European leaders to discuss imposing additional sanctions on Russia after America’s Cold War rival stepped up military exercises in a show of its intentions in Ukraine. Secretary of State John Kerry warned Russia that continued aggression will prove to be an expensive mistake. Ukraine accused Russia of trying to start a third world war by removing Ukraine’s pro-European government.

The volume of shares changing hands in Stoxx 600-listed companies was 30 percent lower than the 30-day average for this time of the day, according to data compiled by Bloomberg.

Neste Oil dropped 5.1 percent to 14.78 euros. The Finnish oil refiner reported first-quarter earnings of 12 euro cents a share, missing analysts’ average estimate for 14 cents. Neste predicted it will post comparable operating profit of 405 million euros ($560 million) to 495 million euros in 2014, lower than its earlier projection of 500 million euros.

Sandvik declined 3 percent to 92.45 kronor. The world’s biggest maker of metal-cutting tools posted first-quarter operating profit of 2.48 billion kronor ($377 million), falling short of analysts’ estimate of 2.6 billion kronor.

Capital Increase

Deutsche Bank fell 2 percent to 31.31 euros. Germany’s largest lender is considering selling about 5 billion euros of shares to raise capital levels, Handelsblatt reported, citing unidentified people in the finance industry.

Royal KPN NV lost 1.9 percent to 2.46 euros. The biggest Dutch phone company said earnings before interest, taxes, depreciation and amortization slid 22 percent to 624 million euros from a year earlier. That trailed analysts’ 628 million-euro average estimate compiled by Bloomberg.

Electrolux advanced 11 percent to 171 kronor for its biggest rally since April 2009. The world’s second-biggest maker of home appliances said first-quarter earnings before interest, taxes and one-time items rose to 749 million kronor ($114 million). The median estimate of analysts compiled by Bloomberg had called for 613 million kronor. The company, which had predicted “slightly positive” demand in Europe, said it now expects it to increase by as much as 3 percent.

Meda-Mylan

Meda, which had traded little changed for most of the day, jumped 10 percent to 128.50 kronor less than an hour before close. Trading was then halted. The Financial Times reported that Mylan increased its offer for the company to 145 kronor a share from 130 kronor, valuing it at $9 billion. The newspaper cited unidentified sources.

Tate & Lyle Plc gained 5.2 percent to 704 pence. The Daily Mail reported unsourced speculation that companies including Bunge Ltd. could bid for the sugar producer. Bunge could make an offer of 850 pence a share, according to the newspaper, which also named Cargill Inc. as a possible suitor.

Ophir Energy Plc climbed 4 percent to 243.30 euros. UBS AG upgraded the London-based oil and gas explorer to buy from neutral, saying the recent selloff is overdone. Ophir plunged 29 percent this year through yesterday, compared with a 4 percent gain in a gauge of energy companies in the Stoxx 600.

Kering SA added 3.7 percent to 159 euros, its highest price this year. The company said it will reorganize its luxury division after its managing director stepped down. The owner of the Gucci brand also reported a 1.2 percent increase in first-quarter sales.

Trading in Alstom SA shares was suspended in Paris. General Electric Co. is in talks to buy the company, people with knowledge of the matter said. GE executives will meet French leaders in the coming days, a government official said.

To contact the reporter on this story: Inyoung Hwang in London at ihwang7@bloomberg.net

To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net Srinivasan Sivabalan, Will Hadfield