Just a year ago the market, after a catastrophic season of results derived from the health crisis that paralyzed the economy, gave up the benefits of 2020 and began to draw the path of recovery based on the estimates for the following years.

Already then, the consensus envisioned that Wall Street would return to pre-pandemic profit levels in 2021 and that the European stock market would do so a year later, in 2022. However, for the Spanish stock market, in a context in which many companies suspended their own forecasts and delayed their strategic plans, there were no forecasts put on the calendar.

Twelve months later and according to what was expected by the analysts collected by FactSet, in the Old Continent only the German Dax will recover the EPS (earnings per share) that it had before the Covid , and on the other side of the Atlantic the S&P 500 and Nasdaq 100.

As for the Ibex 35, which is still the only European index that still trades 14.1% below the 10,083.6 points it reached on February 19, 2020, experts see, for the first time, 2023 as the year in which the Spanish EPS will exceed that of 2019.

A growing BPA
The ratio that relates the net profit after interest and taxes with the number of outstanding shares of the Ibex 35 contracted in 2020 by 64% compared to 2019, to stand at 237.7 euros per share, while in the case of the EuroStoxx 50 the fall was smaller, 32%, to 161.41 euros per share.

And although it is expected that between 2021 and 2022 the EPS of the Spanish indicator will continue to grow, even meeting the estimate for next year, earnings would still remain 7% below the pre-crisis benefit, so we will have to wait still two more years for the stocks that suffered the most from the consequences of the pandemic, such as banks and firms linked to tourism and travel, to regain the path of growth.

From Andbank, based on its projections of an EPS of 553 euros and a profit multiplier (PER) of 18 times, they give the Ibex 35 a 16% route from current prices, until reaching 10,000 points for the next 12 months .

“It is in that price range where we would see the index trading at reasonable multiples”, assures Álex Fusté, chief economist and investment director of the group in Spain, who affirms that he would not leave the Ibex 35 until he saw it trading at levels “little reasonable, above 10,900 points, “he adds.

They are also positive with the Spanish equities in BNP Paribas for being an economy very aligned with the increase in consumer discretionary and services that is expected in the coming months as the vaccination rate advances. “As the Ibex is sectorially, with a lot of exposure to the financial sector, we do think that banks are going to benefit from this higher consumption, from this gradual rise in rates and a greater provision of provisions that will help the sector”, Gonzalo Murcia, BNP Paribas Wealth Management’s global investment director, points out.

What firms have been recovered
By values, and taking as a reference the ten companies with the highest number of shareholders, the consensus foresees that all except Telefónica , BBVA and Sabadell – which will not recover their pre-Covid profits even in 2023 – will achieve it at the latest in 2023.

While the electricity companies Iberdrola and Endesa were the only companies in this group that did not experience setbacks in 2020 – their EPS grew by 2% and 22% compared to 2019, respectively – CaixaBank and Mapfre will do so this year, in which it is expected that the first reaches 0.26 euros per share, and the insurance company 0.23 euros per share.

In 2022 it will be the turn of Repsol and Inditex . In the case of the former, whose EPS collapsed more than 70% in 2020 dragged down by the collapse of crude prices, in 2022 it will equal the 1.34 euros per share obtained in 2019. In that of the Galician textile, and after its earnings plunged 69.5% in 2020 compared to the previous year, it will reach 1.26 euros per share next year.

Finally, in 2023 Santander will do so if it manages to reach 0.46 euros per share, thus exceeding the 0.43 euros it achieved in 2019. The key to good expectations lies in a clear improvement in profitability. Its ROE forecasts for 2021 reach 7%, and by 2023 it is expected to exceed 8%.

By Sam Rak

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