Europe Inc heads for another quarter of strong profits, defying global gloom

​Major European companies are expected to ‌report substantially ​higher third-quarter earnings, defying a challenging backdrop in global markets as borrowing costs in some of the world's biggest economies hover near ‌multi-year highs.

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, the latest LSEG I/B/E/S data showed on ‌Thursday. That is slightly lower than the second quarter's 23.9% growth but would mark the second-best ‌quarterly profit growth in the past 16 quarters. Excluding the energy sector, the expected growth rate for STOXX 600 companies is a more modest 9.7%.

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

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

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