June 25 (Bloomberg) -- Europe’s debt crisis is putting pressure on corporate earnings globally with companies from Procter & Gamble Co. to Danone cutting forecasts and signaling profits will fall at more companies this year.
Analysts predict members of the Standard & Poor’s 500 Index in the U.S. will report a 1.1 percent average drop in second- quarter earnings, after estimating a gain as recently as last month, according to data compiled by Bloomberg. That would be the first decline in 11 quarters after a 6.2 percent average increase in the first quarter. A stronger dollar is another threat to earnings as U.S. exports become more expensive.
In Asia, the chairman at computer manufacturer Compal Electronics Inc. said last week that concern about a global slowdown is making him less optimistic about the second half of the year. Paris-based Danone lowered its 2012 profitability forecast as Spanish shoppers switch to cheaper brands of yogurt.
“There is a lot of trepidation about second-quarter earnings,” Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York, said in a June 22 interview. He oversees about $2 billion including shares of Apple Inc. and DuPont Co. “You are very unlikely to see companies coming out with favorable outlooks given the problems in Europe and the slowing growth in the U.S. and China.”
The recession that has hit at least 8 of 17 countries in the euro region is hurting demand for all types of products. FedEx Corp., an economic bellwether because it transports phones to pharmaceuticals, last week predicted full-year earnings that trailed some analysts’ estimates. Philip Morris International Inc., the world’s largest publicly traded tobacco company, anticipates second-quarter shipments in the European Union will tumble as much as 9 percent, hurt in part by Spain’s almost 25 percent jobless rate.
“It’s the economy, the unemployment,” Andre Calantzopoulos, Philip Morris’s chief operating officer, told analysts on a June 21 conference call. “It’s the austerity measures.”
Those measures, which include eliminating 150,000 civil service jobs in Greece and cutting 11.5 billion euros ($14.5 billion) from the country’s budget, have curbed spending by consumers and businesses. In Germany, Europe’s largest economy, business confidence fell to the lowest in more than two years in June, a sign the crisis may be spreading as leaders grapple with bailing out Greece, Spain and Italy.