Europe Inc Powers Past Lofty Q2 Profit Expectations

European companies have exceeded already lofty profit expectations in Q2, with earnings growth reaching over 22% according to LSEG I/B/E/S data. This marks the sharpest growth since the second quarter of 2022, and even excluding the energy sector, which has benefited from elevated oil and gas prices, profit growth stands at a robust 11.5%. Deutsche Bank notes that sales growth reached its fastest pace since 2022, despite comparably low inflation.

Barclays identifies a similar upbeat picture, particularly with the tone coming from management teams. 'Firms are positive on outlook, raising capex and confident about margin strength,' Barclays says. Their analysis of STOXX 600 transcripts reveals that while concerns around the economy remain, demand is seen as healthy by most companies.

The strong profit growth and wave of guidance upgrades have shifted investor sentiment, with European stocks hitting a new record this week and on track for the fourth weekly rise in a row.