(Bloomberg) — A looming election, unemployment edging higher and an automotive industry in crisis may not seem like a recipe for German corporate success this year, but a look at earnings projections tells a different story.
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The companies that make up the DAX Index are expected to deliver earnings per share growth of more than 10% in 2025, the highest among European peers, data compiled by Bloomberg Intelligence show. The 40-member gauge, which includes carmakers BMW AG, Mercedes-Benz Group AG and Volkswagen AG, is the only European benchmark seen delivering a double-digit increase, more than the 7.1% average anticipated for the broader Stoxx Europe 600 and ahead of the 8.8% expected for France’s CAC 40.
Some caveats apply, according to BI equity strategists Kaidi Meng and Laurent Douillet. Much of the growth will depend on a rebound in economically sensitive cyclical sectors, and — crucially — Germany’s beleaguered auto industry, which may not materialize until the second half, said Douillet.
“That’s not guaranteed,” they said, pointing to risks including their high exposure to China, a snap election in February that could alter the domestic political landscape, and the advent of potential US tariffs under Donald Trump, who’s set to be inaugurated as president on Jan. 20.
Auto companies will probably deploy some “kitchen sinking in 2024 accounts, which will make the earnings comparison base easier for this year,” said Douillet, who predicts lender Deutsche Bank AG, engineering giant Siemens AG, software maker SAP SE, sports gear maker Adidas AG and luxury carmaker Porsche AG will likely deliver the lion’s share of the growth. Many uncertainties remain, he said.
“Longer term, Germany’s GDP faces the risk of another year of contraction, so clarity of government leadership and a commitment to fiscal expansion will be critical to reviving the slowing economy and the DAX’s valuation.”
The Feb. 23 election may usher in a new government after Chancellor Olaf Scholz pulled the plug in November on a three-way coalition led by his Social Democrats. The conservative CDU-CSU bloc leads polling with almost 33% voter support, according to the latest Bloomberg tally. The far-right Alternative for Germany party, or AfD, is in second place with 18%, with the Social Democrats trailing third on 16%.
