Key facts
- European companies are expected to report 21% year-on-year earnings growth in Q3.
- Energy and basic materials sectors are the primary drivers of this growth.
- This would be the second-best quarterly profit growth in the past 14 quarters.
- Excluding energy, STOXX 600 companies' growth is expected at 9.7%.
- Revenues for European blue-chip companies are projected to increase by 10.6%.
- Real estate sector earnings are expected to decrease by 71.5%.
Major European companies are anticipated to report a significant increase in third-quarter earnings, with aggregate growth projected at 21% for companies on the STOXX 600 index, according to the latest LSEG I/B/E/S data. This figure represents an improvement from earlier forecasts and would mark the second-strongest quarterly profit growth in the last 14 quarters.
The robust growth is largely attributed to the energy and basic materials sectors. Energy majors, in particular, are expected to see profit growth of 115.9% in the third quarter, benefiting from geopolitical factors such as the conflict between the US and Iran and Ukrainian drone attacks on Russian refineries, which have impacted fossil fuel exports. Deutsche Bank noted that strong demand allows companies to pass on higher prices, leading to increased sales, while energy costs represent a smaller share of sales than often perceived.
Excluding the energy sector, the expected earnings growth for STOXX 600 companies moderates to 9.7%. Meanwhile, companies in the European real estate sector are forecast to experience a substantial decline, with earnings expected to be 71.5% smaller compared to the same period last year.
Investors will be closely monitoring upcoming results from key companies such as chip equipment supplier ASML and Swedish telecoms equipment maker Ericsson next week to gauge the overall sentiment and trajectory of the earnings season.