Volkswagen and Novartis May Surprise in Q3 Earnings Season, Warn UBS Analysts

Investing experts at UBS have identified Volkswagen and Novartis as stocks that may present surprises for investors during the upcoming third quarter earnings season.

Analysts highlight several factors that could significantly affect the performance of these companies and their earnings reports. Volkswagen, in particular, faces potential negative surprises due to its vulnerability to declining markets in Europe and China, along with ongoing challenges within the automotive sector. The firm’s first-half earnings before interest and taxes did not meet the seasonal run rate needed to satisfy 2024 expectations. Consequently, analysts predict that Volkswagen may need to lower its guidance, as its EBIT for the first half of the year only reached 47% of what was anticipated.

This underperformance is driven by broader weaknesses in the automotive industry, which is projected to experience reduced growth in 2024.

Novartis is another company analysts expect might fall short in this earnings season. Although the pharmaceutical company is performing well in some areas, it is experiencing pressure on margins that could lead to downward revisions in forecasts. Analysts note that Novartis has only achieved 39% of the EBIT necessary to meet 2024 consensus estimates, indicating a substantial gap unless the company can outperform in the second half of the year. Despite its strong position in the market, Novartis contends with specific challenges in the healthcare equipment and biotechnology sectors, which have exhibited mixed performance in Europe recently.

On a more positive note, International Consolidated Airlines Group (IAG) appears to be well-positioned for potential upside surprises. Analysts believe that IAG may exceed expectations, supported by a robust first-half EBIT that contributed 35% to its annual guidance. With the travel and transportation sectors showing signs of resilience, IAG’s connection to a recovering consumer demand landscape could enhance its third quarter results beyond current market forecasts.

Analysts emphasize that changes in guidance will be crucial in influencing investor reactions throughout the third quarter earnings season.