Barclays thinks the new reporting season could be a crowd pleaser. The bank's strategists, led by Emmanuel Cau, expect third quarter earnings in Europe to have risen 21%, with a weaker euro giving results a nudge. "Resilient hard data and positive pre-announcements suggest third-quarter estimates remain within reach and beats are likely," they wrote, adding that earnings were coming "to the rescue."
Across the street, a Morgan Stanley team headed by Marina Zavolock sees companies outdoing an "already exceptional" second quarter, even with investors fretting about high oil prices, higher bond yields and where we are in the cycle.
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Morgan Stanley is most upbeat on semiconductors, banks, energy and capital goods for Q3. Among individual names, they highlight Accor SA, Nokia Oyj, Banco Santander SA, Legrand SA and UniCredit SpA as candidates most likely to clear the bar on profits.
Barclays argues Europe should benefit from a wider spread of profit drivers than the US, where technology accounts for about 70% of earnings. That still leaves this quarter's outcome tightly linked to AI, they say, but in Europe banks matter more than tech. Over the last year, energy stocks have dominated the Stoxx Europe 600, buoyed by the surge in crude.
European equities have gone sideways since notching a record in August, a high water mark that followed one of the strongest corporate showings in years. With early reporters now in focus, investors are asking if profits can reignite a year end push. Barclays frames the moment this way: with recent jitters around AI, oil and rising rates, this season is a chance for "equities to connect back to fundamentals."
Looking further out, Morgan Stanley raised its MSCI Europe target for June 2027 to 2,840, implying about 12% upside, on the back of higher projected earnings per share. Barclays, meanwhile, expects net upgrades to continue but sees the pace easing into 2027, writing that a "peaking growth impulse, tougher base effects and fading energy tailwinds point to a moderation in earnings momentum." For everyday investors, that mix translates to a market leaning on earnings delivery in the near term, while the longer term may be more about grinding out gains than sprinting higher.
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