August is about to end and with it the summer quarter will also end. A quarter in which stock market shocks have not been lacking, after the calm sea that had practically reigned during the first half of the year. And in this summer period, when the word recession once again hovers over the economy, in Europe CRH, LVMH and L’Oréal They lead the three main improvements of the recommendations that the experts have made during this period. On the other side of the table, ING, Inditex and Flutter are suffering the biggest cuts to their boards of directors.
If the English company CRH already had a good buy recommendation at the beginning of June, the advice of experts to acquire its shares on the stock market is now even stronger. CRH is one of the leading building materials companies. And, beyond the solvency of its business (experts expect the results to significantly improve the 2023 accounts and come closer to historical figures), this is its stock market year. The company hit all-time highs for its price in March and although this ceiling has caused three months of sharp declines, it is approaching again, to within 4% of these levels. And it is doing so while still counting on an increase potential for the following months of 16%with which it will continue to raise this ceiling, and also after having revalued by more than 20% on the English market this year.
“We continue to see room for upside in CRH shares as the company continues to post strong operational (and peer-to-peer) performance driven by its approach based on vertically integrated solutions. This solution approach has been rejected by investors due to their understanding of CRH’s business and competitive advantage in this area. Moreover, in the context of a strong pipeline of new infrastructure projects, aided by fiscal stimulus, we see more opportunities for CRH to demonstrate the merits of this business model,” they explain at JP Morgan.
If there is one sector that has been particularly affected by the weakness of the Chinese economy, it is the luxury sector. LVMH (which is currently the second largest European company) has already suffered a contraction in its net profit in its first-half accounts due to this situation. Faced with this scenario, investors have continued to unwind their positions on the giant luxury (owner of brands like LVMH or Christian Dior) who reduced its stock market value by almost 9% during the year. However, analysts believe that these declines nevertheless generate a better opportunity to enter the company. Now, with its price below 700 euros per share, Their buy recommendation is better than the one they had already given it at the end of May.
The consensus of analysts collected by FactSet estimates that the difficulties due to the Chinese situation will only be temporary and, although they estimate that the company’s net profit will be slightly lower in 2024 than in 2023, it will return to growth from 2025. . For its shares also project an increase potential of 22% for the coming months with which it would erase the losses it is currently suffering on the Paris Stock Exchange.
China is also a burden for L’Oréal and the blow was so strong this last quarter thatThe French company has turned negative on the stock market this yearafter losing 13% of its value since the end of May. In fact, in mid-August it even lost the level of 380 euros, which is the level of March 2023. Its recommendation, even if it continues to be a hold for experts, is now less strong than it was at the end of last quarter.
“We believe that L’Oréal remains better positioned in the global beauty market to achieve better resultsbenefiting from its digital leadership, investments in innovation and diversification of categories and channels. “We expect revenue growth to remain resilient in fiscal 2024, albeit below consensus, as we take a cautious stance on China, while growth in the US and Europe also normalizes,” they explain at JP Morgan.
And despite the declines suffered by its stock in recent months, L’Oréal is taking steps to bring investors back to its price. In early August, the French group acquired 10% of Galderma, a dermocosmetics company that was the protagonist of one of the latest IPOs. “L’Oréal has a very good long-term track record in mergers and acquisitions; with this acquisition and that of Aesop, investors could question the short-term interest of this capital allocation given the lack of profits, although this has already been said on several occasions about their mergers and acquisitions,” they explain at Barclays.
However, despite the situation the company is going through, analysts are optimistic about its shares. an increase potential of 13% for the following months, which would allow it to erase the losses it has accumulated due to the weight of this last quarter. And, even with the Chinese vicissitudes, the consensus of experts collected by FactSet expects L’Oréal to place its 2024 profit 5% above that of 2023.
Among all this list, it is also worth highlighting the evolution of the TotalEnergies recommendation over the quarter, which the experts have improved moving from advising them to hold their shares to recommending them to buyThe French company is making slight progress on the stock market this year and has a potential increase of 15%.
Worst of the quarter
Not all are improvements during the quarter, as some have also received reductions from the experts in their recommendations and among the largest in Europe this quarter is a Spanish company. Although the largest reduction is suffered by ING.
Clearly weighed down by the rate cut cycle that the European Central Bank (ECB) began in June (and which will continue at the next meeting in September), experts have moved from recommend buying the Dutch bank’s securities rather than recommending holding themAfter having appreciated by almost 20% on the stock market over the year, its share price is still showing an increase of 15%.
The Spaniard who slips into this list of downgrades is none other than Inditex. It is true that the year of the textile giant is also extraordinary and recently, the company has once again set new historical highs on the stock market. This good stock market performance (+8% over the year) has led its stock to be listed as having no potential for experts, who They have aggravated the advice to maintain that they had already done so in early June.
Among the biggest board cuts, the English Flutter also stands out, dedicated to betting and gambling, whose hold recommendation also suffers a worsening this quarter. In its case, however, its upward potential on the Stock Exchange amounts to 19%, after having progressed by almost 14% over the year on the English stock exchange.
