Jan 15 (Reuters) – European corporate earnings are set to decline in the fourth quarter, the latest forecasts showed on Thursday, as geopolitical uncertainty mounts and the market awaits a decision from the U.S.
Supreme Court on the legality of President Donald Trump’s tariffs.
European firms are expected to report a 4.1% drop in 2025 fourth-quarter earnings, on average, according to LSEG I/B/E/S data, worse than the 3.9% decrease analysts expected a week ago.
That would be the worst earnings performance in the past seven quarters.
WHY IT MATTERS
As Europe reels from sluggish growth prospects and a more uncertain trade environment, the Supreme Court’s ruling could have far-reaching consequences for the global economy if it overturns a wide array of tariffs imposed by U.S.
President Donald Trump.
Though European investors seem negative towards the upcoming results season, they have pushed bourses to records, with the FTSE , DAX and STOXX indexes recently hitting their highest levels ever.
Revenues are also expected to shrink 2.9% compared to last year, according to the LSEG data.
That is worse than the 2.6% fall expected last week.
CONTEXT
Meanwhile, earnings of U.S. companies are forecast to significantly outperform European ones with S&P 500 companies expected to deliver 8.8% average earnings growth, according to a different LSEG I/B/E/S report published on Friday.
Early forecasts are not always good predictors of the end result.
For months, investors expected unremarkable or even negative growth for 2025’s third-quarter results, but STOXX 600 companies ended up delivering 7.3% year-on-year earnings growth in the quarter.
(Reporting by Javi West Larrañaga; Editing by Matt Scuffham)
