Energy lifts European earnings growth forecast to four-year high

Estimates for European blue-chips' third-quarter earnings ​growth rose for a third consecutive week ​as the energy sector ‌lifted forecasts, ​surpassing a strong second quarter to reach the highest level in four years, LSEG I/B/E/S data showed on ‌Thursday. Companies on Europe's benchmark STOXX 600 index are expected to report quarterly earnings growth of 25% in aggregate, up from 23.6% a week earlier, based on results ‌from 212 companies and estimates for those yet to report.

The energy sector is ‌seen posting a 153.4% jump in profits, up from 139% a week earlier. Shell and TotalEnergies reported their highest quarterly profits since 2022 last week, helped by energy prices driven by the Iran ⁠war ​and record refining ⁠margins. Excluding energy, earnings are expected to grow 9.5%, down from 9.8% a week earlier, while the ⁠revenue growth forecast slipped to 11.9% from 13.6% the previous week.

Basic materials companies have so ​far reported profits nearly 22% below analysts' estimates on aggregate, and consumer ⁠cyclicals 16% below, according to LSEG. The materials sector’s growth forecast has dropped to 10.1% from 37.9% ⁠a ​week earlier. Europe's profit recovery is broadening as spending on AI, electrification and defence drives demand, and remaining "areas of softness" did not change the overall message, ⁠UBS Global Wealth Management's Matthew Gilman wrote in a note on Wednesday.

Next week, investors ⁠will be watching ⁠results from Siemens, Allianz and chipmaker Infineon, among 40 STOXX 600 companies due to report.