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Investing.com - European companies are largely anticipated to deliver second-quarter earnings beats, but uncertainty around foreign exchange movements and tariffs means that full-year outlooks remain "in the balance," according to analysts at Barclays (LON:BARC).
In a note, the brokerage flagged that consensus earnings per share growth estimates for the three-month period were slashed after U.S. President Donald Trump revealed his elevated "reciprocal" tariffs in early April.
Economists have warned that the levies could drive up inflationary pressures, particularly in the U.S., and weigh on broader growth. With these fears in mind, consensus expectations were cut to 0% in Europe and 5% in the U.S. -- the lowest in more than five quarters.
Global growth, however, has managed to remain widely resilient during this time, leaving room for European firms to unveil better-than-anticipated returns on "well-managed expectations" and overcome headwinds from a recently stronger euro, the Barclays analysts led by Emmanuel Cau said.
Yet the outlook for the coming months has been made murkier by Trump’s tariffs, with the levies’ impact on European corporate margins and guidance set to be closely monitored by analysts.
Annual estimates seem "realistic" at the moment, "but still hang in the balance," the Barclays analysts said, adding that their research suggests that European per-share income will notch no growth this year -- down from a prior projection at the start of 2025 for an increase of 9%.
They especially noted a "divide" in earnings momentum between outperforming domestic European companies and more export-oriented regional businesses that have been dented by fears over Trump’s tariffs, saying a positioning gap between the two cohorts has become "extreme." The risk of the trend reversing has been raised, they added.
"With peak trade uncertainty potentially past, and tentative EUR/USD stabilisation, select opportunities may emerge among undervalued EU exporters," the strategists wrote. Athletic apparel group Adidas (ETR:ADSGN), telecoms name Ericsson (ST:ERICb) and shipping giant AP Moeller - Maersk (CSE:MAERSKb) were listed as some of those exporters.