European corporate outlook brightens as results defy worst fears

By Javi West Larrañaga

Feb 19 (Reuters) - The outlook for European corporate health has improved, the latest LSEG I/B/E/S forecasts showed on Wednesday, reflecting a softer than expected decline in results in the ongoing earnings season.

European companies are expected to report a 0.6% drop in 2025 fourth-quarter earnings, on average, according to LSEG data, an improvement from ‌the 1.1% decrease analysts expected a week ago.

Out of the 163 companies on Europe's benchmark STOXX 600 index .STOXX that have reported earnings to date, 57.1% reported results exceeding analyst estimates.

Revenue estimates also improved, according to the LSEG data, though they are still forecast to fall 2.4%. That would confirm a trend, seen in six out of seven most recent quarters, where company earnings have outpaced revenues.

WORST FEARS NOT REALISED

Estimates for European companies' earnings sharply deteriorated after U.S. President Donald Trump touted plans for a wide array of tariffs in February 2025, causing unprecedented uncertainty and upending the status quo in matters of trade.

That contributed to the worsening of expectations for STOXX 600 company earnings, from around 11% growth expected before the announcement to a contraction of up to 4.2% estimated in January.

After months of companies front-loading exports, reassessing supply chain strategies, hiking prices and cutting costs, these estimates have somewhat improved, but European companies are still forecast to deliver their worst earnings performance in the ‍past seven quarters, based on the data.

The outlook for STOXX 600 companies contrasts sharply with that of U.S.-listed companies, as blended earnings of S&P 500 .SPX firms are expected to grow 13.6% year-on-year in the fourth quarter, according to a separate LSEG report published on Friday.