Global Market: European blue-chips set for strongest earnings in four years

Companies listed on Europe's benchmark STOXX 600 index are expected to report average earnings growth of 23.6% in the third quarter compared with the same period last year. The estimate is based on results from 144 companies that have reported so far and market forecasts for those yet to announce their financial performance.

The projected growth is marginally below the 23.9% increase recorded in the previous quarter, highlighting the resilience of corporate earnings despite an uncertain global economic environment.

Energy Sector Drives Earnings Growth

The energy sector has emerged as the biggest contributor to the strong earnings performance. According to the LSEG report cited by Reuters, energy companies are expected to post a 139% jump in third-quarter profits from a year earlier, benefiting from higher energy prices linked to the Iran war and record refining margins.

However, earnings growth across the broader European corporate landscape also remains encouraging when the energy sector is excluded.

Companies outside the energy sector are expected to report aggregate third-quarter earnings growth of 9.8%, comfortably above the average growth rate of 7.1% recorded over the previous 16 quarters, the report showed.

European Corporate Revenue Outlook Improves

The outlook for corporate revenues has also strengthened. Third-quarter revenue among STOXX 600 companies is now expected to increase 13.6% year-on-year, which would represent the strongest growth since the third quarter of 2022, according to the LSEG data cited by Reuters.

The report indicated that eight out of 10 sectors are expected to record profit growth during the quarter, suggesting that earnings momentum is extending beyond energy companies.

However, the performance is expected to remain uneven across industries. Real estate companies and consumer cyclicals, including automobile manufacturers, retailers and entertainment businesses, are forecast to report declining earnings.

STOXX 600 Rises on Strong Corporate Results

The improving earnings outlook has also supported investor sentiment in European equity markets. The STOXX 600 touched its highest level in more than a month on Thursday as a series of strong corporate earnings reports lifted market confidence, Reuters reported.

Defence and energy stocks were among the biggest gainers, reflecting continued investor interest in companies benefiting from supportive industry trends and higher energy prices.

The earnings performance could provide further support to European equities, although differences in sectoral performance and the outlook for consumer-facing businesses remain important factors for investors to monitor.