The outlook for European companies improves as companies defy uncertainty

The health outlook for European companies is improving, the latest earnings estimates showed on Tuesday, as companies continue to show they have navigated trade and economic uncertainty in recent months.

According to LSEG I/B/E/S data, European companies are expected to report average third-quarter earnings growth of 6.2%, above the 4.3% increase that analysts expected last week.

However, the earnings outlook worsened with a forecast decline of 1.2%, worse than last week’s forecast 0.9% decline.

This would confirm a trend, seen in five of the last six quarters, of earnings lagging or falling more than earnings.

FEAR OF EXCESSIVE TRADING

Companies have addressed this uncertainty in several ways in the past year: increasing exports, reassessing supply chain strategies, raising prices and cutting costs.

Many lowered previous worst-case estimates after the European Union and Japan, among others, signed a trade agreement with lower interest rates than those initially touted by US President Donald Trump.

For now, the tariffs have not had the negative impact on Europe’s economy as previously feared, but the impact of the volume of imports before the tariffs were imposed continues to diminish, European Central Bank policymaker Boris Vujcic said earlier on Tuesday.

However, the performance gap between European and US companies continues to widen, with earnings of S&P 500 companies expected to increase by 16.8%.

Results from German engineering group Siemens and insurer Allianz this weekend could further show how the companies have overcome additional hurdles and the dollar’s devaluation.
Source: Reuters