Strategists at Deutsche Bank say European corporate earnings for the third quarter could once again beat expectations, potentially serving as a short-term catalyst for the stock market.
A research team led by Maximilian Uleer forecasts that European corporate profit growth could reach 25%, roughly 5 percentage points above the market consensus.
The team believes inflation is bringing benefits rather than a shock, as companies can pass rising input costs on to product selling prices, thereby boosting revenue and profit margins.
Excluding the energy sector, earnings growth is expected to be 15%.
The report states that the energy sector remains the largest contributor, but the earnings improvement is broad-based; resilient demand is supporting earnings in cyclical manufacturing and technology sectors.
Relatively large-scale hedging operations will limit the short-term impact of rising energy costs.
The outlook beyond the third quarter is mixed: full-year 2026 earnings revisions remain upward, but recent upgrades have been driven mainly by the energy sector; earnings estimates excluding the energy sector have been essentially flat since the previous earnings season.
The team says a strong earnings season could provide short-term support for European equities, as was the case in the second quarter: at that time, better-than-expected results allowed the market to temporarily set aside macroeconomic worries and pushed stocks higher.
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