Energy sector drives European Q2 earnings amid a slowdown in underlying growth
Anticipated rising oil prices will enhance European second-quarter earnings, counterbalancing the subdued underlying corporate growth outside the energy sector.
Europe’s energy sector is anticipated to propel corporate earnings growth in the second quarter, providing a counterbalance to the weaker performance seen across much of the broader market as underlying business activity decelerates.
Companies listed on the STOXX 600 index are expected to achieve overall earnings growth of 15.3% in the second quarter, as per the LSEG IBES forecasts released on Thursday. Excluding energy companies, earnings growth is anticipated to decelerate significantly to 6.0%.
The disparity is also evident in revenue forecasts. Overall second-quarter sales are projected to rise by 10.5%, while revenue growth, excluding the energy sector, is anticipated to be only 3.9%.
Analysts anticipate that Europe’s leading energy producers will showcase a significant increase in profits, bolstered by elevated crude oil prices resulting from tensions in the Middle East. Meanwhile, analysts have slightly adjusted earnings forecasts for companies outside the energy sector, indicating a more subdued underlying corporate growth.
Although the outlook beyond energy appears weaker, the recovery in earnings is increasingly becoming more widespread. Analysts now expect eight of the ten sectors in the STOXX 600 to demonstrate year-on-year profit growth, up from five sectors in the first quarter.
Despite this, the energy sector is projected to continue as the leading performer, with profits anticipated to more than double and greatly surpass increases in all other industries, solidifying its position as the primary catalyst for European corporate earnings growth in the second quarter.
