European Corporates Head for Best Quarterly Earnings Growth in Three Years
Strong Earnings Growth Driven by Energy Majors
May 7 (Reuters) - Estimates for European blue-chip companies earnings are heading for their strongest growth since the first quarter of 2023, the latest LSEG I/B/E/S data showed on Thursday, thanks in part to soaring profits for energy majors.
Quarterly Earnings Performance
Earnings of European blue-chips are now expected to have grown 10.2% year-on-year in the first quarter, on average, based on results from 211 STOXX 600 companies and market estimates for those that are yet to report, the data showed.
Impact of Energy and Non-Energy Sectors
Though earnings of energy companies - expected to grow by a breathtaking 48.4% - skew the average, non-energy companies are
seen posting 5.7% higher earnings year-on-year.
Revenue Trends and Cost-Cutting Measures
• However, the outlook for revenues has worsened from last week's 0.7% increase
• STOXX 600 companies are now forecast to report a meagre 0.2% revenue growth
• Weak revenue growth coupled with higher earnings may be a sign that companies' efforts to cut costs and restructure businesses could be paying off
• According to the report, 60.2% of companies beat earnings estimates
Sector Highlights and Market Influences
• European energy majors have benefited from higher oil prices due to the war in the Middle East
• Though crude futures have fallen on hopes of a peace deal, they are still about 35% above pre-war levels
• The real estate sector, on the other hand, is expected to post earnings 14.3% below those of last year
Market Performance and Global Comparisons
• Europe's benchmark STOXX 600 index quickly lost most of its 2026 gains after the U.S. and Israel struck Iran in February
• It has since partially recovered, but it is still about 2% below pre-war levels
• Despite the turnaround, the outlook for STOXX 600 companies is in contrast with that of U.S. listed S&P 500 firms
• Earnings of S&P 500 companies are expected to rise 27.8%, mostly thanks to technology companies' 51.9% growth, according to a separate LSEG I/B/E/S note from Friday
(Reporting by Javi West Larrañaga in Gdansk; Editing by Matt Scuffham)
