Earnings prospects dim in Europe as warnings mount
* STOXX 600 earnings forecasts cut by 0.5 pct in two weeks
* Financials, materials, tech stocks among worst hit
* More downgrades expected as reporting season progresses
By Toni Vorobyova
LONDON, Oct 16 (Reuters) - A growing trickle of profit warnings has prompted analysts to cut forecasts for European corporate earnings this year, with banks, technology firms and miners among the worst hit, Thomson Reuters data shows.
In the past two weeks, consensus expectations for 2013 earnings from STOXX Europe 600 companies have been cut by 0.5 percent, according to StarMine, as analysts factor in profit warnings from companies including lift maker Schindler , defence group Chemring and medical technology specialist Getinge.
With two analyst downgrades for every upgrade, European earnings momentum - seen as decisive for whether equities rally further as the boost from central bank stimulus runs out - remains firmly negative.
The trend is likely to be maintained as the European third- quarter results season gathers pace, opening the door for more companies to adjust full-year expectations.
"It's not that earnings won't ultimately rise if the recovery keeps going, but there will be a bit of a longer lag than normal between the economic pick-up and the earnings pick-up," said Daniel McCormack, strategist at Macquarie, forecasting that European earnings will be down around 5 percent this year.
Of the three worst-hit sectors, earnings among materials firms have been cut by 2.8 percent in the past two weeks, diversified financials by 2.3 percent and tech hardware by 2.0 percent.
"In the near term it is the commodity space that is suffering the most extensive downgrades and that's not overly surprising given what's happened to demand in this space, and what's happening to supply," McCormack said.
"We are probably through most of the downgrades in the energy and materials sectors, but there is still more to come, in my view. They still look vulnerable."
Among technology firms whose earnings have been downgraded, Finnish IT services provider Tieto has cut jobs to offset a drop in technology spending in the telecoms sector, and French software maker Dassault Systemes warned on full-year revenues.
Mixed results from global peers like Intel are also weighing on the sector.
"Intel and some of the tech companies have expressed less PC demand and I am sure that's having an impact in Europe too," said James Butterfill, equity strategist at Coutts.
Some financial groups' earnings were downgraded in the wake of weak numbers from Citigroup and JPMorgan. Investors are also concerned a U.S. fiscal stalemate will hit trading volumes and thus banks' revenues.
Among the most widely downgraded companies are those that have already issued warnings or reported weak quarterly numbers: Nokian Tyres and bookmaker William Hill have seen estimate downgrades from 14 analysts each, while seismic surveyor TGS Nopec and supermarket major Tesco have both suffered 15 cuts.
The TGS warning on full-year revenue saw estimates cut for rival seismic explorers PGS (Editing by Nigel Stephenson and David Cowell)