Europe's energy sector's de-rating 'seems excessive'

Clémence Dachicourt of Morningstar Investment Management Europe

Clémence Dachicourt of Morningstar Investment Management Europe

The European energy sector has underperformed the broader European market over the past three years by 3.4% on an annualised basis.

Its dividend yield spread against the market has expanded substantially on the back of higher commodity price volatility, uncertainty over global demand growth and future profitability in the context of energy transition. Sector earnings momentum continues to be negative; expected earnings growth have been cut by 15% and 12% over the past year for 2020 and 2021 (to 14.5% and 6.7%). Non-OPEC production growth remains strong while further expected reductions in oil breakevens have not come through in 2019.  Experts urge investors not to reposition portfolios in wake of 'inferno' Iran...

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