Major European companies expect 20.7% earnings growth in the third quarter, LSEG data showed on Thursday. While energy and tech sectors show strong gains, analysts slashed forecasts for consumer cyclicals like cars. Michael Field said, "We expect a real dichotomy in earnings," as weak consumer sentiment hits many major firms.
Oct 16 (Reuters) - Major European companies are expected to report strong earnings growth in the third quarter, although analysts slashed estimates for cyclical consumer products such as cars over the past week, the latest LSEG I/B/E/S data showed late on Thursday.
Companies on Europe’s benchmark STOXX 600 index (.STOXX), opens new tab are expected to report quarterly earnings growth of 20.7% on aggregate, led by energy companies that benefit from supply disruptions caused by the Iran War and Ukrainian drone attacks on Russian refineries.
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That is slightly below last week’s forecast of 21%. Analysts raised their revenue forecasts, with sales now expected to grow 11.0% on average, up from 10.6% a week ago.
The consumer cyclicals sector, which includes automakers and luxury firms, is now expected to post a 2.6% fall in quarterly earnings, compared with forecast growth of 26% last week.
The downgrades follow falling third-quarter deliveries at Volkswagen (VOWG.DE), opens new tab and BMW (BMWG.DE), opens new tab mainly due to slumping demand in China, with VW posting its steepest drop in more than four years.
Higher estimates for energy and technology, however, offset most of the downgrade. The energy sector's forecast rose to 124.0% from 115.9%, and the tech industry's to 32.7% from 24.4%, after chip equipment maker ASML (ASML.AS), opens new tab and telecoms equipment provider Ericsson (ERICb.ST), opens new tab beat market estimates.
"We expect a real dichotomy in earnings," Michael Field, Morningstar's EMEA equity strategist, said on Wednesday, adding that companies exposed to high energy prices and weak consumer sentiment may struggle.
Next week, investors will be closely watching results of software maker SAP (SAPG.DE), opens new tab, engineering group ABB (ABBN.S), opens new tab and British lender Barclays (BARC.L), opens new tab, among the 44 STOXX 600 companies due to report.