Companies in the STOXX 600 index are now expected to report second-quarter earnings growth of 22.4%, according to LSEG I/B/E/S data cited by Reuters. The estimate is based on results from 236 companies and forecasts for those yet to report.
The improvement has been broadening beyond the energy sector. Excluding energy companies, STOXX 600 earnings are expected to rise 11.5% from a year earlier, compared with an estimate of 5.5% at the beginning of July. Revenue growth expectations have also increased to 12.6%, which would represent the strongest rate in 16 quarters.
Energy remains the largest contributor to headline profit growth. Sector earnings are expected to increase 135.8%, while basic materials companies, including chemical firms, steelmakers and miners, are forecast to deliver 57.6% growth.
The earnings data provide an important counterweight to macroeconomic uncertainty. European businesses continue to operate against a backdrop of geopolitical tension, fluctuating energy costs and uncertainty over global monetary policy. Stronger corporate results suggest that at least some companies are managing those pressures through pricing power, demand resilience or improved operating performance.
European shares closed at a record high for a third consecutive session on Thursday as investors assessed corporate results alongside expectations surrounding a possible US-Iran peace agreement and the potential reopening of Hormuz.
For investors, the distinction between sector-wide earnings strength and concentration in a small number of industries remains important. Strong energy and materials profits may not necessarily indicate equivalent improvement across consumer, technology or industrial businesses.
The outlook will also depend on whether geopolitical developments continue to support commodity prices or begin to reverse them. A sustained reduction in energy prices could benefit energy-intensive businesses but reduce earnings support for producers.
What to watch: the next wave of European earnings, revisions to full-year guidance and the extent to which earnings growth spreads beyond energy and materials. Investors will also be monitoring how lower oil prices and changing US rate expectations affect European valuations.
