The Coming Week in Europe: Firms Seek Their Place in Earnings Spotlight

BERLIN -- After taking cues from corporate America in recent weeks, a slew of European companies will set their own agenda in the coming week with a flurry of earnings reports.

That should help investors determine for themselves the earnings quality of some large Continental firms, rather than be influenced by the latest travails of their North American corporate counterparts. Lately, many big European stocks have been mercilessly batted about depending on how their rivals on the other side of the ocean are doing, instead of their own bottom line.

And while it's true that Wall Street often sets the tone for Europe's equity markets and not vice versa, many of the European companies reporting next week are big enough on the global scene to pique interest on both sides of the Atlantic.

Deutsche Telekom (DT), Deutsche Bank (DTBKY) and telcom-equipment maker Alcatel (ALA) are just some of the big names reporting next week. Besides the ADRs of the companies that trade on U.S. markets, mutual funds that favor these shares, such as the (JPEEX)J.P. Morgan European Equity and the (MAEFX)Merrill Lynch Euro A funds, are likely to get bumped around as well.

However, before the earnings train gets rolling, the subscription period will begin on Monday for one of the biggest initial public offerings this year, as the German government sells about a third of Deutsche Post. The company is Europe's largest postal operator and is selling itself to retail investors as a global logistics contender to the likes of UPS (UPS) and FedEx (FDX).

Also on Monday, Schering (SHR), the inventor of the birth-control pill, will post its third-quarter earnings. Net profit for the drug maker is expected to improve considerably over last year.

On Tuesday, telecom issues will take center stage, as both Deutsche Telekom and Alcatel report. Deutsche Telekom will release preliminary figures for its third quarter, which should show higher sales and net profit. Full figures won't be published until November, but Tuesday's numbers should give enough of a perspective to move the stock one way or another. Also likely to affect the shares is speculation Deutsche Telekom is preparing to take a stake in Switzerland's second-largest mobile operator, diAx.

Deutche Telekom's shares have recently been creeping higher as fund managers slowly begin to look at a stock shunned by investors in recent months. "A lot of people have been underweight and are starting to move towards a more neutral position," says one German fund manager who declined to be named. On Friday, Telekom closed 2.91 euros higher, or 6.9%, at 45.11 ($37.40).

Alcatel has recently suffered terribly in the wake of Canadian rival Nortel's (NT) woes. After plunging last week when Nortel warned its earnings wouldn't be up to snuff, the telcom-equipment provider will get a chance to show its fundamentals don't warrant such treatment. "Alcatel's shares have been volatile due to competitors' profit warnings, [which were] largely the result of their poor execution," but any worries should be allayed by the company's expected solid third-quarter figures, according to James Heal, an analyst with Commerzbank in London. Commerzbank rates Alcatel a buy and does not have an investment banking relationship with the company.

And if investors haven't had enough earnings fun by midweek, two German banking giants will wrap things up with their own numbers. Deutsche Bank will report third-quarter figures on Wednesday and Dresdner Bank (DRSDY) will do the same on Thursday.

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