European corporate outlook improves, but earnings forecast to fall

The outlook for ​European corporate health has improved, ​the latest LSEG I/B/E/S forecasts ‌showed ​on Thursday, as European blue-chip indices hit highs on the back of a better-than-anticipated earnings season so far.

European ‌companies are expected to report a 1.1% drop in 2025 fourth-quarter earnings, on average, according to LSEG data, a substantial improvement from the 3.1% decrease analysts expected ‌a week ago. That would be still be the worst earnings performance ‌in the ‍past seven quarters, based on the LSEG data.

OUTLOOK REBOUNDS Market forecasts for fourth-quarter earnings sharply deteriorated after U.S. President Donald Trump announced plans for a wide array of tariffs on ⁠trading ​partners in February ⁠last year.

Expectations for STOXX 600 company earnings worsened from around 11% growth expected before the announcement ⁠to a contraction of as much as 4.2% estimated in January. Despite that, forecasts have ​slightly rebounded in past weeks, as 60% of companies have posted better-than-expected results ⁠so far this season. In a typical quarter, 54% beat analyst estimates, according to LSEG ⁠data.

The ​outlook for revenue, however, deteriorated, and revenues of STOXX 600 companies are now expected to be 3.4% lower than in the same period ⁠last year, compared to a forecast of a 3.2% decrease last week. Better-than-expected results of ⁠luxury group ⁠Hermes and Ray-Ban maker EssilorLuxottica coupled with positive guidance for 2026 from the world's largest brewer Anheuser-Busch Inbev and Siemens were helping ‌sentiment in ‌Europe.