Europe’s energy sector is expected to drive corporate earnings growth in the second quarter, helping offset weaker performance across much of the broader market as underlying business activity slows.
According to LSEG IBES forecasts released on Thursday, companies listed on the STOXX 600 index are projected to post overall earnings growth of 15.3% in the second quarter. Excluding energy companies, however, earnings growth is expected to slow sharply to 6.0%.
The gap is also reflected in revenue projections. Overall second-quarter sales are forecast to increase by 10.5%, but revenue growth is expected to come in at just 3.9% when the energy sector is excluded.
Analysts expect Europe’s major energy producers to report a sharp rise in profits, supported by higher crude oil prices driven by tensions in the Middle East. Meanwhile, earnings forecasts for companies outside the energy sector have been revised slightly lower, underscoring softer underlying corporate growth.
Despite the weaker outlook beyond energy, the earnings recovery is becoming more broad-based. Eight of the STOXX 600’s ten sectors are now expected to report year-on-year profit growth, up from five sectors in the first quarter.
Even so, the energy sector is forecast to remain the standout performer, with profits expected to more than double and significantly outpace gains across all other industries, reinforcing its role as the main driver of European corporate earnings growth in the second quarter.
Goodness Anunobi
