Europe’s slow but steady recovery presents a fertile ground for investors to consider investing in fundamentally sound companies like Novo Nordisk A/S (NVO), SAP SE (SAP), and Shell plc (SHEL), which are well-positioned to capitalize on the region’s improving economic landscape.
The eurozone has been flirting with recession for over a year, but recent indicators offer hope. Industrial output increased by 1.8% in August, slightly above expectations, with capital and durable consumer goods driving demand. Germany, the largest economy in the region, saw a 3% surge in output. While the broader eurozone’s annual output growth remains weak, this uptick suggests there’s life in the region’s industrial sector.
Meanwhile, investor sentiment in Germany is also improving, with the ZEW economic sentiment index rising to 13.1 points in October, pointing to increasing optimism around growth prospects. Inflation has also eased, dipping to 2.2%, opening the door for potential interest rate cuts by the European Central Bank.
Moreover, expectations for stable inflation and China’s stimulus measures boosting export demand further enhance the region’s outlook. The EU economy is expected to grow by 1.0% in 2024 and 1.6% in 2025, while the euro area is expected to grow by 0.8% in 2024 and 1.4% in 2025.
Given this backdrop, companies like NVO, SAP, and SHEL seem well-positioned to benefit from Europe’s economic rebound. Let’s delve into the fundamental aspects of these stocks in detail:
Novo Nordisk A/S (NVO)
Headquartered in Bagsvaerd, Denmark, NVO is a global healthcare company that discovers, develops, manufactures, and markets pharmaceutical products. It operates through two business segments: Diabetes and Obesity care; and Biopharm.
On October 8, NVO launched the Childhood Obesity Prevention Initiative, targeting disadvantaged urban communities in six cities across five continents. With an investment of over 250 million Danish kroner ($36.51 million), this three-year initiative aims to promote physical activity and healthy eating among children to combat obesity.
In June, the company announced a $4.1 billion investment to expand US manufacturing capacity by building a second fill and finishing manufacturing facility in Clayton, North Carolina. This will grow the facility’s ability to produce current and future injectable treatments for people with obesity and other serious chronic diseases.
For the first half of the year that ended June 30, 2024, NVO’s net sales increased 23.9% year-over-year to Kr133.41 billion ($19.48 billion), while its operating profit came in at Kr57.78 billion ($8.44 billion) up 18.2% year-over-year. The company’s net profit came in at Kr45.46 billion ($6.64 billion) and Kr10.17 per share, representing 15.8% and 16.8% increases year-over-year, respectively.
The consensus EPS estimate of $0.85 for the fiscal third quarter (ended September 2024) represents a 19.6% improvement year-over-year. The consensus revenue estimate of $10.52 billion for the about-to-be-quarter represents a 25.9% increase from last year. The company has an impressive surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 15.3%, closing the last trading session at $117.81.
NVO’s promising fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
It has an A grade for Quality and is ranked #23 out of 159 stocks in the Medical - Pharmaceuticals industry. Click here to see the additional ratings for NVO (Growth, Value, Momentum, Stability, and Sentiment).
SAP SE (SAP)
SAP is a Germany-based company that offers enterprise application software. It operates through three segments: Applications, Technology & Services; the SAP Business Network; and the Customer Experience.
On September 12, the company completed its acquisition of WalkMe Ltd. (WKME) for $1.5 billion in an all-cash deal. WKME’s digital adoption platform will enhance SAP’s Business Transformation Management portfolio, including SAP Signavio and SAP LeanIX, by improving workflow execution and user experience. Its AI technology will also power SAP’s Joule copilot, offering context-aware assistance to boost workflow productivity.
SAP’s total revenue for the second quarter (ended June 30, 2024) increased 9.7% year-over-year to €8.29 billion ($9.03 billion). Its gross profit grew 11.2% from the year-ago value to €6.02 billion ($6.56 billion).
The company’s cash inflow from operating activities amounted to €1.54 billion ($4.78 billion), representing an 81.6% improvement from the same period last year. Also, its free cash flow stood at €1.29 billion ($1.41 billion), up 113.7% year-over-year.
Analysts expect SAP’s revenue for the fourth quarter (ending December 2024) to grow 7.7% year-over-year to $9.89 billion, while its EPS for the same period is expected to increase 3.8% from the prior year to $1.59. Also, it topped the revenue estimates in three of the trailing four quarters.
The stock has gained 78.2% over the past year to close the last trading session at $229.52.
SAP’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It also has a B grade for Stability, Sentiment, and Quality. Out of 131 stocks in the Software – Application industry, SAP is ranked #24. Click here to see SAP’s Growth, Value, and Momentum ratings.
Shell plc (SHEL)
SHEL is an international energy and petrochemical company headquartered in London, United Kingdom. The company is engaged in the exploration, production, refining, and marketing of oil and natural gas, as well as the manufacturing and marketing of chemicals. Its businesses include Upstream, Integrated Gas, Renewables and Energy Solutions, and Downstream.
On September 9, the company paid an interim dividend for the second quarter of 2024 of $ 0.34 per ordinary share. SHEL pays an annual dividend of $2.73, which translates to a yield of 4.13% at the current share price. Its four-year average dividend yield is 3.11%.
On August 14, Shell Offshore Inc., a subsidiary of SHEL, announced its Final Investment Decision (FID) for a water injection project at the Vito asset in the U.S. Gulf of Mexico. Set to begin in 2027, the waterflood process aims to boost oil recovery by displacing additional oil in the reservoir. This investment is expected to increase production capacity and deliver high-margin, lower-carbon barrels from the company’s Upstream business.
During the fiscal second quarter, which ended June 30, 20234, SHEL’s total revenue and other income amounted to $75.06 billion, while its adjusted earnings grew 24% from the year-ago value to $6.29 billion. The company’s adjusted EBITDA increased 16.4% year-over-year to $16.81 billion. Also, its adjusted EPS rose 32% from the prior year’s quarter to $0.99.
Street expects SHEL’s revenue for the fiscal third quarter (ended September 2024) to increase 2.2% year-over-year to $77.99 billion, while its EPS for the same period is expected to come in at $1.73. Moreover, it beat the EPS estimates in three of the trailing four quarters, which is promising.
Shares of SHEL have gained 3.6% over the past nine months to close the last trading session at $66.08.
It is no surprise that SHEL has an overall rating of B, equating to a Buy in our POWR Ratings system. It has a B grade for Stability and Quality. Within the Energy - Oil & Gas industry, it is ranked #6 out of 77 stocks.
In addition to the POWR Rating grades I’ve just highlighted, you can see SHEL’s Growth, Value, Momentum, and Sentiment ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
NVO shares were trading at $117.58 per share on Wednesday afternoon, down $0.23 (-0.20%). Year-to-date, NVO has gained 14.54%, versus a 23.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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