European majors set for Q3 earnings growth despite darkening view on consumer cyclicals

By Reuters News

Oct 16 (Reuters) - Major European companies are expected to report strong earnings growth in the third quarter, although analysts slashed estimates for cyclical consumer products such as cars over the past week, the latest LSEG I/B/E/S data showed late on Thursday.

Companies on Europe’s benchmark STOXX 600 index .STOXX are expected to report quarterly earnings growth of 20.7% on aggregate, led by energy companies that benefit from supply disruptions caused by the Iran War and Ukrainian drone attacks on Russian refineries.

That is slightly below last week’s forecast of 21%. Analysts raised their revenue forecasts, with sales now expected to grow 11.0% on average, up from 10.6% a week ago.

The consumer cyclicals sector, which includes automakers and luxury firms, is now expected to post a 2.6% fall in quarterly earnings, compared with forecast growth of 26% last week.

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The downgrades follow falling third-quarter deliveries at Volkswagen VOWG.DE and BMW BMWG.DE mainly due to slumping demand in China, with VW posting its steepest drop in more than four years.

Higher estimates for energy and technology, however, offset most of the downgrade. The energy sector's forecast rose to 124.0% from 115.9%, and the tech industry's to 32.7% from 24.4%, after chip equipment maker ASML ASML.AS and telecoms equipment provider Ericsson ERICb.ST beat market estimates.

"We expect a real dichotomy in earnings," Michael Field, Morningstar's EMEA equity strategist, said on Wednesday, adding that companies exposed to high energy prices and weak consumer sentiment may struggle.

Next week, investors will be closely watching results of software maker SAP SAPG.DE, engineering group ABB ABBN.S and British lender Barclays BARC.L, among the 44 STOXX 600 companies due to report.

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