Analysts’ expectations for Ibex 35 companies’ profits in 2022 are 30% lower than they were before the outbreak of the pandemic. However, they expect a certain normalization next year with respect to 2021, as well as less sectorial dispersion in the impact on corporate results.
This is evidenced by the graph ‘Evolution of profit expectations of listed companies since the beginning of the Covid-19 crisis’ published last Friday by the Bank of Spain. It will be part of the next quarterly report published by the central bank.
The Bank of Spain has found that the profit expectations of Spanish listed companies as a whole have fallen sharply during the pandemic. And this has contributed to the largest relative fall in stock market indices in Spain.
Between the beginning of February and the end of March 2020, the level of earnings per share that most of analysts expected for companies in the S&P 500, the EURO STOXX 50 and the Ibex 35 in 2022 fell by around 5%, Analysts continued to revise these expectations downwards in the following months.
This process was much more pronounced in the case of Ibex 35 companies. This is due to the greater relative economic impact of the crisis in Spain and in the countries to which Spanish listed companies are exposed.
The rise in expected profits in 2022 for listed companies in Europe and Spain began in November, following the announcement of the development of effective vaccines against the virus. Since then, the improvement in expectations for the coming year has been “relatively modest”.
Specifically, analysts forecast that profit expectations for Ibex companies in 2022 will be 30% below those expected in February 2020. That said, they also expect the negative impact of the pandemic on the profits of listed companies in 2022 to be lower than in 2021.
According to the Bank of Spain, this “would be consistent with a gradual recovery in corporate activity over the forecast horizon, somewhat more intense in the case of Spanish listed companies.”
Uncertainty regarding profit forecasts for 2022, which increased at the beginning of the pandemic and was more intense and persistent for Ibex 35 companies than in the other two indices analyzed, has also been reduced in recent months. Uncertainty is also higher for the 2021 financial year than for 2022.
The impact of the pandemic on corporate earnings expectations was also mixed by economic sector, with the fall in forecasts for the energy and banking sectors being more pronounced.
Expectations have stabilised since November and even improved for the banking sector, but remain well below pre-crisis levels.
In any case, the report notes a generalised reduction in the dispersion between sectors in 2022 compared to 2021, especially in the case of the Spanish index. This is mainly due to better expectations for next year in the sectors most affected by the pandemic.
