European majors set for Q3 earnings growth despite darkening view on consumer cyclicals

Major European companies are expected to report ​strong earnings growth in the third ​quarter, although analysts slashed estimates ‌for cyclical ​consumer products such as cars over the past week, the latest LSEG I/B/E/S data showed late on Thursday. Companies on ‌Europe’s benchmark STOXX 600 index are expected to report quarterly earnings growth of 20.7% on aggregate, led by energy companies that benefit from supply disruptions caused by the Iran War ‌and Ukrainian drone attacks on Russian refineries.

That is slightly below last week’s forecast ‌of 21%. Analysts raised their revenue forecasts, with sales now expected to grow 11.0% on average, up from 10.6% a week ago. The consumer cyclicals sector, which includes automakers and luxury firms, is now ⁠expected to ​post a 2.6% ⁠fall in quarterly earnings, compared with forecast growth of 26% last week.

The downgrades follow falling third-quarter deliveries ⁠at Volkswagen and BMW mainly due to slumping demand in China, with VW posting its steepest ​drop in more than four years. Higher estimates for energy and technology, however, offset most ⁠of the downgrade. The energy sector's forecast rose to 124.0% from 115.9%, and the tech industry's ⁠to ​32.7% from 24.4%, after chip equipment maker ASML and telecoms equipment provider Ericsson beat market estimates.

"We expect a real dichotomy in earnings," Michael Field, Morningstar's EMEA equity ⁠strategist, said on Wednesday, adding that companies exposed to high energy prices and weak consumer sentiment ⁠may struggle. Next ⁠week, investors will be closely watching results of software maker SAP, engineering group ABB and British lender Barclays, among the 44 STOXX ‌600 companies due ‌to report.