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Investing.com - After the busiest week of Europe’s second-quarter earnings calendar, 72% of companies in MSCI Europe -- representing more than a third of the market cap of the regional tracker of large- and mid-sized businesses -- have now reported, according to analysts at Morgan Stanley (NYSE:MS).
In a note on Monday, the brokerage said the net share of firms whose results beat quarterly expectations has risen to 23% from 13% in their previous update last week.
But Morgan Stanley said their analysts’ take on the impact on consensus near-term earnings per share after second-quarter results -- a gauge of financial guidance -- is "mixed" at a +2% net skew, up from -4% previously but well below the U.S. equivalent of +26%.
Meanwhile, on a rolling four-week basis, Europe’s earnings revisions rate has largely recovered to levels last seen at the start of the reporting period, yet is still negative at -9%. The U.S. counterpart, by contrast, is "comfortably in positive territory and rising," the Morgan Stanley analyst said, although they flagged that the European revision rate is recovering "against a backdrop of already heavily downgraded" 2025 consensus growth projections.
"Europe’s earnings revisions breadth remains amongst weakest of major regions globally, but has begun to recover from heavy downgrades into and during the season," the analysts wrote.
They added that "uncertainty lingers" in the wider operating environment, limiting the extent of recovery in business confidence, investment, hiring and consumer confidence.
For European equities, "this means sideways, choppy trading, [...] low earnings growth, a sustained shift into resilient pockets of the market, and continued high stock level dispersion," the analysts said. They flagged that the impact of sweeping U.S. tariffs is expected to "inevitably broaden" in the coming quarters.
Their top picks for companies in the region that are still to report include Siemens Energy AG (ETR:ENR1n) Energy, KBC (EBR:KBC), Rheinmetall (ETR:RHMG), Commerzbank (ETR:CBKG), and Adyen (AS:ADYEN).