{"id":33386,"date":"2025-11-12T16:22:54","date_gmt":"2025-11-12T15:22:54","guid":{"rendered":"https:\/\/news.banquerichelieu.com\/?p=33386"},"modified":"2025-11-12T16:22:55","modified_gmt":"2025-11-12T15:22:55","slug":"weekly-flash-week-42-3","status":"publish","type":"post","link":"https:\/\/news.banquerichelieu.com\/en\/2025\/11\/12\/weekly-flash-week-42-3\/","title":{"rendered":"Weekly Flash – Week 42"},"content":{"rendered":"\n
    \n
  1. Earnings are growing<\/strong><\/li>\n\n\n\n
  2. Legrand: is the Datacenter theme running out of steam?<\/strong><\/li>\n<\/ol>\n\n\n\n

    US EQUITIES<\/strong><\/h2>\n\n\n\n

    Earnings are growing<\/strong><\/p>\n\n\n\n

    S&P 500’s third quarter 2025 earnings release is coming to an end<\/strong>. The S&P 500 has a market capitalization of approximately $60 trillion<\/strong> and approximately $2.4 trillion in expected earnings for 2025. Quarterly earnings growth is up 10.7%<\/strong>compared to the 7.3% estimated at the end of June 2025, according to Factset.<\/p>\n\n\n\n

      \n
    • The trend of the last 10 years continues:<\/strong><\/li>\n<\/ul>\n\n\n\n

      Between 2015 and 2025, earnings per share<\/strong> (EPS) on the S&P 500 increased 2.25 fold<\/strong>, according to Factset. Earnings from information technology<\/strong> and communication services<\/strong> stocks were the main driver of this growth. These sectors accounted for just over 22% of market capitalization and 24% of earnings in 2015, but now represent 47% of market capitalization and 38% of earnings<\/strong>. For example, the combined earnings of Apple, Amazon, Alphabet, Microsoft, and Nvidia increased six fold to reach $550 billion in 2025. Following the acceleration of the digitization of our economies during the pandemic, S&P 500 earnings rose sharply between 2019 and 2021: +27%. Then, following the sharp rise in interest rates in 2022, earnings stagnated between 2021 and 2023.<\/p>\n\n\n\n

        \n
      • For the past two years, profit growth has been picking up speed again<\/strong><\/li>\n<\/ul>\n\n\n\n

        Since 2024, EPS growth has picked up<\/strong> again. It rose by 10% in 2024 and by 11% over the first nine months of the year, which is almost as much as expected at the beginning of the year despite the impact of tariffs. In Q3-25, the two main drivers of growth were technology<\/strong> and financial stocks<\/strong>, up 26%<\/strong> and 21%<\/strong> respectively. These sectors are also the two biggest contributors to S&P 500 earnings, accounting for 27%<\/strong> and 19%<\/strong> respectively.<\/p>\n\n\n\n

          \n
        • Now and tomorrow<\/strong><\/li>\n<\/ul>\n\n\n\n

          Given these factors, analysts’ growth expectations for the last quarter of 2025 of +6.5% certainly take into account a base effect, but seems low compared to 2025. <\/p>\n\n\n\n

          The consensus of analysts’ S&P500 EPS<\/strong> for 2026<\/strong> compiled by Factset is $305, or +14%.<\/strong><\/p>\n\n\n\n

          The stock market has been correcting in the last 10 days <\/strong>in response to Powell’s less accommodating than expected speech and weaker employment figures in a context where the S&P 500 valuation ratio is relatively high. However, many of the companies that make up the index are highly sought after by investors <\/strong>for their exceptional growth and margin levels, as well as their value creation strategy for the coming years. This week, for example, Tesla<\/strong> shareholders, which remains a UFO on the stock market with a valuation of $1.5 trillion and $5.5 billion in projected earnings for 202<\/strong>5, approved CEO Musk’s<\/strong> stock compensation plan<\/strong>. The plan grants him $1 trillion in shares over the next 10 years<\/strong> in 12 tranches. The first tranche would be paid if Tesla reaches a valuation of $2 trillion and one of the following targets: EBITDA of $50 billion, 11.5 million new vehicles delivered compared to 8.5 million currently in circulation, 1 million robots sold, and 1 million robot taxis in operation.<\/p>\n\n\n\n

          Although the US stock market remains relatively expensive compared<\/strong> to its historical levels and is adjusting in the short term in line with interest rates, earnings growth is above 10%.<\/strong> While we agree that there are a few pockets of overvaluation and some very risky companies, the market is full of high-quality companies whose valuations remain reasonable given their growth prospects<\/strong>.<\/p>\n\n\n\n

          EUROPEAN EQUITIES<\/strong><\/h2>\n\n\n\n

          Legrand: is the Datacenter theme running out of steam?<\/strong><\/p>\n\n\n\n

            \n
          • Sharp drop in Legrand\u2019s share price<\/strong>\u00a0(-12.2% on November 6) following a third quarter that fell short of expectations, despite a\u00a0decidedly optimistic tone from management<\/strong>\u00a0during the earnings call.<\/li>\n<\/ul>\n\n\n\n

            <\/p>\n\n\n\n

              \n
            • The group reported organic growth of 6.7%, significantly below the 8.7% expected by consensus. By comparison,\u00a0Schneider<\/strong>\u00a0posted 9% organic growth in Q3, driven by Industrial Automation. At Legrand, the\u00a0disappointment stems from the North American market<\/strong>, which grew by +13.3% (vs. +18.1% expected by consensus and +20.5% in H1), while the European market at +2.7% exceeded expectations (+2.1%). Operating margin came in at 20%, 0.6% below expectations; margin was also a source of disappointment for Schneider a few days earlier.<\/li>\n<\/ul>\n\n\n\n

              <\/p>\n\n\n\n

                \n
              • The confirmation of 2025 guidance, raised in July (organic growth of 5\u20137% and operating margin of 20.5\u201321%), was\u00a0clearly a letdown<\/strong>: consensus, already higher (8.5% organic growth and >21% margin), had hoped for at least an upward revision of the lower bound.<\/li>\n<\/ul>\n\n\n\n

                <\/p>\n\n\n\n

                  \n
                • The\u00a0Datacenter<\/strong>\u00a0business (40% of North American sales and now 25% of group revenue vs. 15% in 2023) is undoubtedly the\u00a0most attractive end market<\/strong>and has captured investors\u2019 full attention. Datacenter growth remains very strong, above 30% for the first nine months of the year. The group now anticipates +30% for 2025, after previously guiding for +10% and then +20% earlier this year. While Q3 momentum appears softer than in H1, despite\u00a0market expectations of sequential acceleration<\/strong>, this is due to a\u00a0demanding comparison base<\/strong>\u00a0(+25% in H2 2024 and a very strong Q4). According to management, the slowdown is therefore \u201cpurely optical.\u201d With 30% growth in datacenters in 2025 (vs. +15% in 2024), Legrand claims slightly above-market growth, consistent with that of\u00a0U.S. competitor Vertiv<\/strong>\u2014the only peer publishing figures (Schneider, for now, only provides double-digit growth indications).<\/li>\n<\/ul>\n\n\n\n

                  <\/p>\n\n\n\n

                    \n
                  • In any case, the stock\u2019s decline is part of a\u00a0broader market context, with recent profit-taking in AI-driven stocks<\/strong>. The market\u2019s reaction must be viewed in light of\u00a0Legrand\u2019s historically high share price<\/strong>\u00a0following a strong rally this year (still up +40% even after the drop), fueled by positive sentiment around datacenters. With peak stock performance and\u00a0a forward 2026 P\/E ratio close to 25x (pre-drop),<\/strong>\u00a0there was little room for disappointment in the earnings release. This explains why the stock fell much more than the expected consensus estimate revisions post-publication (around 1\u20132%).<\/li>\n<\/ul>\n\n\n\n

                    <\/p>\n\n\n\n

                      \n
                    • Beyond the datacenter momentum (which will remain strong in 2026), a rerating of the stock will now be difficult without a more pronounced sequential improvement in the\u00a0European residential<\/strong>\u00a0and\u00a0U.S. commercial markets<\/strong>. The group\u2019s profitability in construction is on par with that of datacenters, so the operational leverage from a rebound in the 75% of group revenue tied to construction is far from negligible.<\/li>\n<\/ul>\n\n\n\n

                      <\/p>\n\n\n\n

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                      • In the sector,\u00a0Schneider\u2019s<\/strong>\u00a0Investor Day (December 11 in London) will be an opportunity for the group to detail its growth and market share in datacenters (it has been, so far, less vocal on the topic than Legrand), as well as its efficiency and productivity measures supporting margins. Schneider, with a more diversified profile than Legrand (\u20ac136bn market cap vs. \u20ac33bn for Legrand), has underperformed the sector this year following disappointing earnings releases, but could regain favor among investors seeking high-quality stocks that have lagged in performance.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"

                        US EQUITIES Earnings are growing S&P 500’s third quarter 2025 earnings release is coming to an end. The S&P 500 has a market capitalization of approximately $60 trillion and approximately $2.4 trillion in expected earnings for 2025. Quarterly earnings growth is up 10.7%compared to the 7.3% estimated at the end of June 2025, according to Factset. Between 2015 […]<\/p>\n","protected":false},"author":1,"featured_media":33384,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[66],"tags":[],"class_list":{"0":"post-33386","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-macro-markets"},"acf":[],"_links":{"self":[{"href":"https:\/\/news.banquerichelieu.com\/en\/wp-json\/wp\/v2\/posts\/33386","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/news.banquerichelieu.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/news.banquerichelieu.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/news.banquerichelieu.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/news.banquerichelieu.com\/en\/wp-json\/wp\/v2\/comments?post=33386"}],"version-history":[{"count":1,"href":"https:\/\/news.banquerichelieu.com\/en\/wp-json\/wp\/v2\/posts\/33386\/revisions"}],"predecessor-version":[{"id":33387,"href":"https:\/\/news.banquerichelieu.com\/en\/wp-json\/wp\/v2\/posts\/33386\/revisions\/33387"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/news.banquerichelieu.com\/en\/wp-json\/wp\/v2\/media\/33384"}],"wp:attachment":[{"href":"https:\/\/news.banquerichelieu.com\/en\/wp-json\/wp\/v2\/media?parent=33386"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/news.banquerichelieu.com\/en\/wp-json\/wp\/v2\/categories?post=33386"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/news.banquerichelieu.com\/en\/wp-json\/wp\/v2\/tags?post=33386"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}