April 2 (Reuters) - European blue chip companies are set to deliver growing profits in the first quarter, the latest forecasts showed on Thursday, thanks to strong expectations for energy companies.
European Q1 Profits Expected to Rise 4% Led by Booming Energy Sector
Q1 Earnings Outlook for European Blue Chip Companies
April 2 (Reuters) - European blue chip companies are set to deliver growing profits in the first quarter, the latest forecasts showed on Thursday, thanks to strong expectations for energy companies.
STOXX 600 companies are expected to report growth of 4% in first-quarter earnings, on average, according to LSEG I/B/E/S data, compared to the 2% year-on-year decline the previous quarter.
Energy Sector Drives Profit Growth
Impact of Middle East Conflict on Crude Prices
That is mostly due to a windfall blessing for energy companies as the ongoing war in the Middle East has raised crude prices by 50% to 70%
Energy Sector Earnings Surge
Earnings of energy companies are expected to rise by 24.9% according to LSEG's report, while other sectors are set to deliver a 1.5% increase on average
Revenue Trends and Cost Management
Revenue Growth Slower Than Earnings
Revenues are also seen growing compared to the same period last year, albeit at a slower rate —compared to earnings— of 1.7%, the data showed
Cost-Cutting and Restructuring Efforts
Revenues have lagged earnings in seven of the past eight quarters, showing that companies efforts to cut costs and restructure businesses could be paying off
Improving Earnings Estimates
Upward Revisions Since Start of Year
Estimates for European companies' earnings have considerably improved in the past months, especially after the conflict began
From Modest Growth to Stronger Forecasts
Initial and Updated Profit Expectations
Profits of European majors were expected to grow at a very modest 0.9% at the beginning of the year, but estimates have consistently improved in recent weeks
Investor Perspectives
Long-Term Economic Impact
Investors say the reverberations of the conflict will take a while to feed through the economy
(Reporting by Javi West Larrañaga; Editing by Matt Scuffham)
