Recently, a European investor asked me for some European stock recommendations. It’s fairly common that I will hold one or two European stocks in my Cabot Undervalued Stocks Advisor portfolios. In recent years, these portfolios profited from B.P. plc (BP) and ASML Holding N.V. (ASML).
My problem with European stocks is that I rely upon Wall Street to give me a clear idea of how these companies are expected to perform in the near future, by assessing consensus earnings and revenue estimates. That can be a tricky endeavor, because many European stocks do not garner analyst research coverage in the U.S. Without consensus earnings estimates, I can’t proceed with stock analysis.
Fortunately, I’m able to access useful earnings and revenue estimates on a couple of dozen European companies. Here are three companies with great fundamentals that you can add to your stock watch list.
European Stocks for 2019: Equinor ASA (EQNR)
Equinor ASA (EQNR – yield 4.7%), formerly Statoil ASA (STO), is an integrated energy company operating in more than 30 countries, and based in Norway, where the government is a majority owner. The company changed its name in 2018 as it seeks to broaden its focus to include new energy solutions – primarily wind – and attract young talent. Equinor intends to focus 2019 activity in the Mariner and Rosebank oilfield projects in the U.K. Continental Shelf.
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Using a proven system, we've been able to outperform the market, year after year, delivering a portfolio that outperformed their comparable U.S. market indices by margins of 50% to 100% and more—with less risk.
Earnings per share (EPS) grew a whopping 62.1% in 2018, though they could backtrack this year. That said, the 2019 price/earnings ratio (P/E) is low at just a shade under 10, and the dividend yield is substantial at 4.7%, with a steady $0.26 quarterly payout.
The share price has fallen from 28.5 to 22 since September, but it’s been trading in the 21-to-23 range since the start of the year. With a breakout likely coming, that looks like a nice buying opportunity.
European Stocks for 2019: NXP Semiconductors (NXPI)
NXP Semiconductors (NXPI – yield 1.1%) is an electronics company with operations in 33 countries, based in the Netherlands, and serving the automotive, IoT and industrial markets. In February 2018, Qualcomm (QCOM) made a bid for NXP that eventually failed to receive approval from China’s Ministry of Commerce. NXP received a merger termination fee of $2 billion from Qualcomm. NXP subsequently announced a $5 billion stock buyback authorization.
After a year of relatively slow EPS growth in 2018, the company is expected to grow EPS by 21.4% in 2019, while the P/E is just 14. There’s a steady $0.25 quarterly dividend payout, yielding 1.1%.
NXP’s stock fell from a 2018 high of about 125 to a low of about 70 in November. The share price has recovered nicely since, and has been on a steady uptick for nearly three months, rising as high as 97 before settling back in its current 91-to-94 trading range. Try to buy on dips.
European Stocks for 2019: Royal Dutch Shell (RDS.A)
Royal Dutch Shell plc (RDS.A – yield 6.1%) is a British-Dutch energy company that’s headquartered in the Netherlands. Earnings growth is strong, expected to reach 28.7% and 19.4% EPS growth in 2018 and 2019, respectively. The 2019 P/E is 11, and the steady quarterly dividend payout of $0.94 per ADS share is yielding 6.1%. Shell is featured in this December 16 article from OilPrice.com, “Big Oil Is Better Prepared For The Next Price Crash.”
In 2018, the share price ranged from a high of 72 down to 55, and is back around the middle of that trading range after a big January. Dividend investors and growth investors alike should start buying now, or on small dips.
*This post has been updated from an original version, published in December 2018.