Key Points
- Second-quarter earnings are set to be reported against a background of macro-economic uncertainty governed by U.S. President Donald Trump’s trade tariffs.
- Energy, the cyclical consumer and the financial sector will be some of the most closely watched in European markets this reporting season.
- Earnings per share across Europe’s benchmark Stoxx 600 are expected to fall 0.2% on an annualized basis in the second quarter, according to LSEG I/B/E/S research.
U.S. President Donald Trump’s tariff policies are dominating attention ahead of the second-quarter earnings season, especially in Europe, where five companies worth over 50 billion euros ($58 billion) are due to report this week. Earnings estimates for companies around the world have fallen sharply in recent months as analysts attempt to predict the potential impact of the duties. Earnings per share across Europe’s benchmark Stoxx 600 are expected to fall 0.2% on an annualized basis in the second quarter, according to LSEG I/B/E/S research. On April 1, ahead of Trump’s so-called “Liberation Day,” analysts expected 7.2% growth. If the revised expectations play out, this will mark the first period of negative earnings performance across the index since the second quarter of 2024. Expectations for European earnings have fallen more sharply than for those in the U.S. — across the S & P 500 , earnings per share are seen growing 5.8% on the year, down from expectations of just over 10% at the beginning of April. Analysts at Bank of America have flagged the strength of the euro in recent months as another risk to earnings performance. Amid dollar weakness, the euro has risen over 8% versus the greenback since the start of April. In a note to clients, BofA said earnings in sectors with high U.S. sales exposure, including consumer firms, pharma and media companies, were most likely at risk of a forex hit. Here are three key sectors analysts are watching as Europe’s largest companies prepare to report. Energy Earnings across the energy sector are seen falling by over 15% in the second quarter, according to LSEG estimates. That marks a sharp drop in expectations over the course of the year, with analysts expecting over 10% growth on Jan. 1. The sector is also set to be a key drag on the Stoxx 600, with analysts at Deutsche Bank saying it is expected to be the main negative contributor to earnings. According to its research, released on June 25, overall earnings would have been forecast to rise narrowly this quarter, if the energy sector were excluded. Key for energy stocks has been a drop in crude prices, despite a fleeting uptick in June as conflict in the Middle East dominated headlines. Throughout the second quarter, Brent crude prices fell over 9%, and much of the quarter saw prices below that level, before Israel launched strikes against Iran . However, oil and gas stocks rebounded sharply from their lows after Trump’s tariff announcement, with the Stoxx 600 Oil & Gas index now above its April 1 level. The first of Europe’s major energy players will report next week, with Equinor due to release results on Wednesday, July 23, and TotalEnergies following the next day. Cyclical consumer It’s also expected to be a downbeat quarter for some of Europe’s consumer-facing companies, as concerns over the health of global demand and dollar weakness hit the sector outlook. According to analyst estimates compiled by LSEG I/B/E/S, cyclical consumer earnings are forecast to slide 24.1% this quarter. The figure compares to a decline of just over 5% that had been projected at the start of April. Consumer companies will also be a key area of focus for earnings season in the U.K. Analysts at Deutsche Bank have flagged the consumer discretionary sector as a likely drag on earnings in the more domestic-focused FTSE 250 index, and say the potential for a tariff-driven fall in consumer demand could create uncertainty. Commentary across consumer companies will be key as investors look to assess the impact of tariff policies. While only a small number of companies in the U.K. reported results in the first quarter (as the companies tend to report semi-annually), Deutsche Bank research still found companies citing direct tariff impacts. We’ll get a first check on the consumer sector with key luxury stocks reporting next week, including Christian Dior and sector bellwether LVMH on Wednesday. Financials Analysts will be closely tracking the performance of Europe’s banking and financial services companies in the second quarter, after five straight quarters of double-digit earnings-per-share growth. This earnings season, performance is expected to be more subdued, with growth of just under 2% expected, according to LSEG I/B/E/S data. Bank of America analysts noted that the banking sector has been a major support to European earnings in recent quarters, which could make its performance this year even more noteworthy. Earnings season will also pose a key test to the sector after a rapid run-up in valuations. Europe’s Stoxx 600 Banks index just posted its best first half of the year since 1997, on the back of earnings outperformance in the first quarter and hopes of deal-making in the sector. Europe’s major lenders will begin to report next Thursday, when we’ll hear from Lloyds Bank in the U.K., and French lender BNP Paribas .
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