A broadening corporate recovery beyond surging energy profits pushed Europe's blue-chip earnings forecasts higher for a ninth straight week, as most reporting companies exceeded analyst expectations in a historically strong season.
Companies in the STOXX 600 (.STOXX) index are now expected to report aggregate earnings growth of 24.1%, up from last week's 23.4% estimate, LSEG I/B/E/S data showed on Wednesday, with 59.9% of the 282 firms that have already reported topping the estimates.
While energy companies are still forecast to lead the index with a 138.6% profit jump, as the Iran war continues to disrupt the international crude market, corporate recovery has expanded into cyclical sectors like basic materials and industrials.
Those two segments have become the market's secondary growth engines, with industrial earnings expected to climb 18.1% following forecast-beating results from manufacturers such as FLSmidth and Geberit.
Excluding energy, STOXX 600 profits are expected to grow 13.1%. Overall revenue expectations remain more modest, with sales projected to increase 11.2% year-on-year, dipping from last week's 11.4% estimate.
Despite the earnings recovery, geopolitical uncertainty continues to weigh on the STOXX 600 index, which slipped to a two-week low on Tuesday amid rising bond yields and inflation fears.
"Markets are focused on whether Europe can replenish its gas storage at reasonable prices ahead of winter, with current inventory levels and costs remaining a key source of uncertainty," KBRA macro strategist Gordon Kerr said.
