European blue-chips set for strongest earnings growth since 2022

European blue-chip companies are on course to deliver their strongest earnings growth since the fourth quarter of 2022, according to the latest LSEG I/B/E/S data released on Thursday.

However, revenues are still expected to decline despite the strong profit performance.

The data showed that earnings for European blue-chip firms are now expected to have risen 11.5% year-on-year during the first quarter.

The improvement was largely driven by strong profits from the energy sector and better-than-expected results from financial companies.

The estimates are based on results from 265 companies in the benchmark STOXX 600 index, along with market forecasts for companies that have yet to report their quarterly earnings.

Energy sector drives earnings growth

The energy sector emerged as the biggest contributor to the earnings growth recorded in the quarter.

European energy majors are expected to post profits 50.4% higher than the same period last year.

According to the data, higher oil prices linked to the war in the Middle East significantly boosted earnings expectations for the sector.

Before the outbreak of the conflict, profits for European energy companies were expected to decline by 2%.

The sharp reversal highlights the impact of rising energy prices on company performance during the quarter.

Although STOXX 600 companies are expected to deliver overall first-quarter earnings growth of 2.8%, the figures are heavily influenced by the energy sector’s strong performance.

Financial companies outperform expectations

The European financial sector also delivered stronger-than-expected results during the quarter.

LSEG I/B/E/S data showed that 68% of financial companies posted earnings above analysts’ estimates.

The sector has therefore become another key contributor to the broader earnings growth seen across European blue-chip firms.

The stronger earnings performance came despite continued concerns over the economic slowdown in Europe.

Companies across sectors have focused on cost optimisation measures in recent years in an effort to improve profitability.

These efforts have helped earnings outperform revenues in several quarters.

Revenues remain under pressure

Despite the sharp improvement in earnings, revenues are still expected to decline in the first quarter.

European blue-chip companies are now forecast to report a 0.4% fall in first-quarter revenues.

The latest figures continue a trend seen in recent reporting periods.

Revenues have lagged earnings in seven of the previous eight quarters.

The divergence suggests that companies have relied more on cost-cutting and efficiency improvements rather than strong sales growth to support profits.

Real estate sector struggles

Not all sectors performed strongly during the quarter.

The real estate sector is expected to report profits 23.9% lower than the same period last year, making it one of the weakest-performing sectors in the index.

The decline reflects ongoing pressure on the sector amid broader economic uncertainty and challenging market conditions.

Regional performance varies across Europe

Performance among European countries also showed wide differences.

Norwegian companies in the STOXX 600 index are expected to deliver the highest earnings growth, with profits projected to increase by 56.3% year-over-year.

Spanish companies are also expected to report strong earnings growth of 31.5%.

Meanwhile, Portuguese firms are forecast to record the steepest decline in profits, with earnings expected to fall 34.3%.

Danish companies are also projected to post weaker results, with profits expected to decline by 8.5%.

The STOXX 600 index has risen 4% since the beginning of the year. However, it remains around 3% below levels seen before the war.