European corporate outlook improves as companies defy uncertainty

European Corporate Earnings Outlook Brightens Amidst Uncertainty

Corporate Earnings and Revenue Trends

By Javi West Larrañaga

Growth in Earnings vs. Revenue Decline

(Reuters) -The outlook for European corporate health has further improved, the latest earnings forecasts showed on Tuesday, as companies continue to show that they have navigated the trade and economic uncertainty of recent months.

Strategies to Navigate Uncertainty

European firms are expected to report growth of 6.2% in third-quarter earnings, on average, according to LSEG I/B/E/S data, above the 4.3% increase analysts expected a week ago.

Comparative Analysis with U.S. Companies

However, the outlook for revenue deteriorated with forecasts of a 1.2% decrease, worse than the 0.9% fall expected last week.

That would confirm a trend, seen in five out of the six most recent quarters, where revenues have lagged or fallen more than earnings.

OVERBLOWN TRADE FEARS

Companies have dealt with the uncertainty in several ways in the past year: frontloading exports, reassessing supply chain strategies, hiking prices and cutting costs.

Many lowered their earlier worst-case forecasts after the EU and Japan, among others, signed lower-rate trade deals than those initially touted by U.S. President Donald Trump.

For now, tariffs have not hurt the European economy as much as feared earlier but the effects of import frontloading before the duties came into effect continue to unwind, European Central Bank policymaker Boris Vujcic said earlier on Tuesday.

Still, the gap in performance between European and U.S. companies has continued to widen, with earnings of S&P 500 companies expected to increase by 16.8%.

Results from German engineering group Siemens and insurer Allianz later this week could further show how companies have coped with the added hurdles and the devaluation of the dollar.

(Reporting by Javi West Larrañaga; Editing by Matt Scuffham)