European fourth-quarter corporate profits expected to fall 3.9%

Jan 29 (Reuters) - The outlook for European corporate health has slightly improved, the latest forecasts showed on Thursday, as trade tensions take a backseat and investors focus on the dollar's weakness and the earnings season.

European firms are expected to report a 3.9% drop in 2025 fourth-quarter earnings, on average, according to LSEG I/B/E/S data, slightly better than ‌the 4.2% decrease analysts expected a week ago.

Revenues are also forecast to fall, with analysts anticipating a 3.5% decrease, unchanged from last week's estimate, the LSEG report showed.

WHY IT MATTERS

Projections for STOXX 600 .STOXX company results have steadily deteriorated after a year of trade upheaval since U.S. President Donald Trump took office.

Fourth-quarter earnings of European blue-chips were forecast to grow as much as 11.1% year-on-year in February, right before Trump announced plans for a wide array of tariffs.

They are now expected to deliver the worst year-on-year change in the past seven quarters.

CONTEXT

This earnings season could show how European businesses are navigating the tough trade disruption, with leaders and policymakers worried that the strengthening of the euro is making domestic exporters less competitive.

The outlook for STOXX 600 companies is in stark contrast to that of U.S. listed companies, with earnings of S&P 500 .SPX firms forecast to grow 9.2%, according to a separate LSEG report published on Friday.