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Investing.com - European companies are expected to report a 3% year-on-year decline in earnings per share (EPS) during the second quarter of 2025, marking the most negative growth in five quarters, according to analysts at Bank of America.
The anticipated earnings decline stems from a combination of weaker demand, with consensus sales growth expectations at a five-quarter low of -3%, and euro strength, with the EUR trade-weighted index up 3.5% year-on-year in Q2.
Energy and consumer discretionary sectors are expected to be the major drags on index earnings, while healthcare is projected to provide some positive offset.
Cyclical sectors excluding financials are expected to return to negative earnings growth after two quarters of positive performance, with cyclicals’ EPS experiencing downgrades of 2.5% over the past month.
This has driven most of the 1% pre-season downgrade for Stoxx 600 Q2 EPS overall, while financials, which had been a major support in previous quarters, are expected to have a muted season.
Euro area macro surprises were mildly positive in Q2, suggesting an EPS beat ratio marginally above the long-run average of 53%.
However, recent euro strength poses a challenge, potentially dragging beats closer to 50%, with sectors having high US sales exposure likely more at risk due to foreign exchange impacts.
Stoxx 600 2025 and 2026 consensus EPS estimates have both seen downgrades of approximately 5% since early April, with 2025 EPS growth expectations halving from around 6% to 3% currently.
Bank of America expects further downside ahead, projecting a 4% year-on-year decline for Stoxx 600 EPS in 2025, citing anticipated global growth weakness, tariff strains, and trade uncertainty.
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