European corporate earnings set to get a boost from energy windfall

The outlook for European companies has ​slightly improved, the latest LSEG ​forecasts showed on Thursday, as ‌energy ​majors are expected to deliver a big jump in third-quarter profit and investors digest a mixed ‌bag of results. Companies on Europe's benchmark STOXX 600 index are expected to report quarterly earnings growth of 21.9% on average, the second-best growth rate in the ‌past four years, the LSEG report showed, based on results from ‌47 companies and market estimates for those that are yet to report.

That is an improvement compared to last week's 20.7% forecast. Energy majors are outliers as their trading desks ⁠profit from ​the volatility and ⁠disruption set off by the US-Iran war and are seen posting earnings 134.1% higher ⁠compared to a year earlier.

Excluding the energy sector, the rest of the companies ​in the STOXX 600 index are expected to book considerably more moderate ⁠gains, at 8.4%, on average. The outlook for European blue-chip companies' third-quarter revenue has also improved ⁠and ​is now seen growing at 13.3% from a year ago, which would mark the best showing since the third quarter of 2022.

But ⁠despite the exceptional growth forecast, European corporations might struggle to convince investors weary ⁠of higher oil ⁠prices and soaring government borrowing costs, which are spurring fears of a replay of the euro zone debt ‌crisis.