European majors' strong earnings growth expected to have continued in Q3

European Companies Driven by Energy Sector Expected to Post Strong Q3 Earnings

Overview of Q3 Earnings Expectations for European Companies

Oct 9 (Reuters) - Major European companies are expected to report substantially higher third-quarter earnings, the latest LSEG I/B/E/S data showed on Thursday, although the year-on-year growth should slightly temper from the previous quarter.

STOXX 600 Index Performance

Companies on Europe's benchmark STOXX 600 index are expected to report quarterly earnings ​growth of 21% on aggregate, mostly buoyed by the energy and basic materials sectors.

Comparison to Previous Forecasts

That is an improvement compared to last week's forecast for 19.4% growth and would mark the second-best quarterly profit growth in the past 14 quarters. Excluding the energy sector, the expected growth rate for STOXX 600 companies is a more modest 9.7%.

Revenue Growth Among Blue-Chip Companies

European blue-chip companies' revenues are seen increasing by 10.6% from a year ago, also above the average of the past couple of years.

Factors Driving Earnings Growth

Impact of Demand and Energy Costs

"Demand is strong enough to allow companies to pass on higher prices which leads to higher sales. At the same time, energy costs make up a smaller share of sales than headlines would suggest," a Deutsche Bank report said earlier this week.

Geopolitical Influences on the Energy Sector

European energy majors have been benefiting from the consequences of the US-Israeli war with Iran and from Ukrainian drone attacks on Russian refineries, which have sharply cut exports from some of the world's biggest producers of fossil fuels.

Expected Profit Growth for Energy Majors

They are now expected to post profit growth of 115.9% for the third quarter, according to the LSEG report.

Sector-Specific Earnings Outlook

Real Estate Sector Performance

Meanwhile, companies in the European real estate sector are seen delivering earnings 71.5% smaller than in the same period last year.

Key Companies to Watch Next Week

Next week, investors will be closely looking at results of chip equipment supplier ASML, Europe's most valuable listed company, and Swedish telecoms equipment maker Ericsson to assess the tone of the earnings season.

(Reporting by Javi West Larrañaga in Gdansk; Editing by Milla Nissi-Prussak)