EMEA Earnings to Watch: Ryanair, Bayer, AstraZeneca, Richemont

(Bloomberg) — A glance at the Stoxx Europe 600 Index’s performance at the sector level gives an indication of the winners and losers of the third-quarter earnings cycle, with travel and leisure stocks streaking ahead, and food, beverage and tobacco bringing up the rear, the only group in the red. Next week will be a test for both as the current reporting season nears a close.

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Budget airlines like Ryanair Holdings Plc, first out of the gate on Monday, can benefit from the economic headwinds as long as they can control costs, a challenge that tripped up peer Wizz Air Holdings Plc this week. When it comes to essentials, the inflation squeeze on disposable incomes is encouraging consumers to trade down brands, which may present a threat for Marks & Spencer Group Plc, due on Wednesday. The UK groceries and clothing chain is focusing on value at the expense of its reputation on the premium end of the price range, as it extends a price freeze on more than 100 food items until the end of January. Meanwhile, customers of Cie Financiere Richemont may carry on oblivious to the cost-of-living crisis, with its results on Friday expected to show resilient demand for luxury jewelery and watches.

Also among this season’s winners are industries with strong pricing power that are less exposed to turbulence in the economy, like pharmaceuticals. Next week, AstraZeneca Plc and Bayer AG will reveal if they’ll join peers like GSK Plc, Sanofi and Novo Nordisk A/S in raising their full-year forecasts.

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For more on what’s going on in other regions, see the US Earnings Week Ahead or the Asia Earnings Week Ahead, and see the ESG Stock Watch for a selection of the environmental, social and governance themes that may come up on this week’s earnings calls.

Highlights to look for next week:

Monday: Ryanair (RYA ID) kicks off the week with half-year results before the market opens. The low-cost carrier could benefit from the worsening economic environment as cash-strapped but still travel-lusty Europeans trade down to the lowest possible air fares. Chief Executive Officer Michael O’Leary warned recently that the company’s ability to gain market share from rivals is at risk from delays to Boeing Co. jetliner deliveries. Bloomberg Intelligence’s Conroy Gaynor says rising costs and deteriorating economies are key concerns to address for budget airlines, despite their rising market shares.

Tuesday: Bayer (BAYN GY) is due to report at 7:30 a.m. CET. BI’s Michael Shah expects the German healthcare and agricultural conglomerate to have continued its double-digit revenue growth trajectory last quarter, driven by currency and favorable commodity and herbicide pricing in Crop Science, its main driver. Bayer raised its outlook in August, with adjusted Ebitda for the year currently forecast at about €12.5 billion and a margin of 26% to 27%. Investors will also be watching for news on litigation, following Bayer’s recent court wins over its Roundup weedkiller, as the company faces yet more trials in the fourth quarter in Florida, Missouri and California. BI’s Holly Froum expects the recent court wins to be outliers and that the full $16 billion reserve taken for the litigation to address current and future cases could be tapped.

Wednesday: Marks & Spencer (MKS LN) is scheduled to report six-month results at 7:00 a.m. GMT. Its focus on value, designed to restore consumer trust and expand revenue, means a short-term step back for margin, according to BI’s Charles Allen. Investment at the Ocado Retail JV also means lower profit, with food sales overall reverting to a more normal store-based pattern, Allen said. That said, its low share of the large-basket grocery market and lesser position in kids’ clothing offer scope for growth.

Thursday: AstraZeneca (AZN LN) is due to report third-quarter results at 7:00 a.m. GMT. The UK drugmaker boosted its revenue forecast in July thanks to a strong performance from Covid-19 medicines, although it stood pat on its core EPS outlook. The initial guidance looked “easily achievable,” a thesis supported by beats in both quarters this year, but margin pressure is building, said BI’s John Murphy. The company has flagged an increase in costs to integrate Alexion and as it steps up spending on R&D and new product launches.

Friday: Richemont’s (CFR SW) half-year results, expected at 7:00 a.m. CET, may well confirm that high-end shoppers are more accepting of rising prices, with BI’s Deborah Aitken expecting “relatively robust” demand for luxury jewelry and watches. Richemont’s sale of a stake in its online retail business YNAP in August should boost the company’s margin prospects, according to Aitken, who also expects an uptick in Asian sales growth as China lifts restrictions. Estimates compiled by Bloomberg expect Richemont’s second-quarter revenue in the Asia Pacific region to have risen 2.8% compared to the same period last year, while total sales are seen up 7.1%.

–With assistance from Ryan Hesketh and Alexey Anishchuk.