r5ttwu27}vo8rxxg1(g1v985_media_dl_1.png Citigroup, Bloomberg

Article content

(Bloomberg) — After two years of almost uninterrupted downgrades, analysts are now raising European earnings estimates at the fastest pace since mid-2024.

Article content

A Citigroup Inc. index shows that European analyst upgrades of profit estimates have exceeded downgrades for a 10th week in a row after being negative all of this year. The last time there was a sequence like this two years ago, forecasts started to drop in the weeks before the reporting period began.

Article content

Article content

Article content

European profits are expected to rise 12% this season, the highest growth in more than three years, according to data compiled by Bloomberg Intelligence. Elevated oil prices are set to have boosted profits at energy companies while banks, among the beneficiaries of artificial intelligence adoption in Europe, are also projected to have another strong earnings season.

Article content

Article content

While the high bar has raised concerns around potential disappointment in results that may play in out share prices, some market participants said Europe Inc. has enough fuel to power the next leg of the benchmark’s record-breaking equity rally.

Article content

“European earnings are misunderstood and underappreciated, benefiting from inflation, AI and global diversification,” said Marina Zavolock, chief European equity strategist at Morgan Stanley. 

Article content

She raised her 2026 earnings growth forecast for MSCI Europe firms to 12.5%, and expects the benchmark to rally another 10% over the coming year.

Article content

After trailing US peers since March, the Stoxx Europe 600 Index outperformed the S&P 500 Index last month as geopolitical risks eased following an interim Iran peace deal. While tensions have ratcheted up again in recent days, oil prices remain below levels seen at the height of the war.

Article content

Investors are slowly returning to the region’s assets. European equity funds attracted inflows of about $400 million in the week through July 8, according to a note from Citigroup citing EPFR Global.

Article content

“Europe is a good diversifier trade,” said Helen Jewell, international chief investment officer for fundamental equities at BlackRock Inc. “AI stocks are still crowded and the breadth of European equities can protect against that. Earnings expectations are robust and companies have sounded resilient.”

Article content