Moody's: Euro manufacturers' outlook is stable on steady earnings growth

The outlook for European manufacturers will be stable over the next 12 to 18 months as a result of ongoing steady earnings growth, says Moody's Investors Service. These improvements will flow from demand stabilisation in European markets and the fruits of restructuring measures.

Moody's report, titled "European Manufacturing: EBITDA Growth to Remain Steady as Companies Reduce Costs", is available on www.moodys.com.

"Stabilising demand in Europe, which will offset slowing emerging market growth, as well as cost-cutting measures will drive anticipated growth and underpin our stable outlook on the European manufacturing sector until 2017," says Roberto Pozzi, a Moody's Vice President -- Senior Credit Officer and author of the report.

Moody's anticipates steady low-single-digit EBITA growth in 2015 and 2016. Industrial automation and transportation end markets will generate the most robust growth, with each to see annual revenue rise by about 4%-5%. Industrial software and signalling, two fairly small but fast-growing segments, will see aggregate growth of about 6%-8%.

Ongoing cost reduction measures will contribute to the improvement in EBITA margins, particularly for ABB Ltd. (A2 stable), Voith GmbH (Baa3 negative), Kion Group AG (Ba2 positive), Heidelberger Druckmaschinen AG (B3 stable) and Royal Philips N.V. (Baa1 stable). Moody's expects aggregate EBITA margins to remain at about 10% over the next 12-18 months.

Moody's expects that demand in the energy sector will further weaken, while European construction demand to continue to stabilize this year and next.