(Bloomberg) — Investors glancing at Germany’s benchmark DAX Index, hovering near a record high reached earlier in March, might be forgiven for thinking companies in Europe’s largest economy are firing on all pistons.
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But closer inspection reveals that almost 90% of this year’s gains can be attributed to just five companies — SAP SE, Siemens AG, Airbus SE, Munich RE and Mercedes-Benz Group AG — with SAP contributing almost 40% to the index’s 6% return. While fourth-quarter earnings from German companies have exceeded expectations, in contrast with the rest of Europe, that has been largely driven by Siemens Energy AG, emerging from a year of heavy losses, according to Bloomberg Intelligence.
The German market’s better-than-expected earnings growth “isn’t as good as it appears on the surface,” said BI analyst Kaidi Meng. “We’re wary that the DAX’s strong momentum and surge to record levels is overly reliant on only five names.”
Medium-sized German companies “stand in stark contrast,” she said. “They rely more on the domestic economy, with indicators still pointing to contraction.”
SAP shares have climbed 25% this year “despite tepid fourth-quarter results,” BI analyst Laurent Douillet said. With a market value of €215 billion ($235 billion), the software giant is benefiting from strong 2024 to 2025 guidance, a 7% increase in dividends and a shift to AI that will result in 8,000 job cuts, he said.
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