GRAPHIC-Global companies’ earnings estimates hit by Russia-Ukraine conflict

By Gaurav Dogra

March 10 (Reuters) – Global companies are seeing big earnings downgrades by investment analysts since Russia’s invasion of Ukraine last month, as fallout from the conflict, including a surge in oil prices, points to an increase in raw material costs and a squeeze on profits this year.

Over the last two weeks, analysts have downgraded their forward 12-month earnings forecasts for global large- and mid-cap firms by 0.5%, based on Refinitiv data on more than 8,000 companies.

For European companies there was a 2.8% downgrade in forward earnings, while Asian firms had downward revisions of 0.45%, and U.S. firms had marginal upgrades of 0.02%.

At the start of 2022, with markets gearing for the Fed to tighten monetary policy, analysts were anticipating an 8.9% earnings jump this year.

These downgrades come amid a slump in global stock prices due to mounting fears that the Russia-Ukraine conflict, which Russia terms a “special operation”, will become a risk to supply chains and exacerbate cost pressures.

Brent crude oil prices have doubled over the last 12 months, a threshold that often occurs ahead of recessions, analysts say.

The MSCI World index .MIWD00000PUS has declined 10.9% this year, after seeing a 16.8% gain last year.

Morgan Stanley had said a month ago it assumed MSCI Europe’s earnings per share (EPS) growth to be 10% this year.

“However, post the recent change in circumstances, our existing bear case scenario is looking increasingly relevant. This assumes a 10% drop in EPS in 2022, and an implied price target 10% below current levels,” the brokerage said.

The Refinitiv data showed energy and mining companies have seen the biggest earnings upgrades in the past month, while consumer discretionary, financials and real estate firms were downgraded.

“Although there are a narrow group of commodity winners, the bulk of equity indices will tend to shudder from the twin shocks of higher input costs and falling new orders,” brokerage Jefferies said in a note this week.

“Hence, earnings revisions are set to turn negative for the first time since the post-pandemic recovery.”

(Reporting By Patturaja Murugaboopathy and Gaurav Dogra
Editing by Vidya Ranganathan and Jane Merriman)

((patturaja.murugaboopathy@thomsonreuters.com;))